<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
For the fiscal year ended June 30, 1997
----------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
------------------ -------------------
Commission file number 0-7903
--------------------------
Quixote Corporation
-------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-2675371
- --------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE EAST WACKER DRIVE, CHICAGO, ILLINOIS 60601
- ------------------------------------------ ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (312) 467-6755
------------------
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock ($.01-2/3 Par Value)
-----------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K (X).
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
$59,500,740 as of August 29, 1997
------------------------------------------------
-1-
<PAGE>
TABLE OF CONTENTS
PART I PAGE
----
Item 1. Business...................................................... 3-7
Item 2. Properties.................................................... 8
Item 3. Legal Proceedings............................................. 9-12
Item 4. Submission of Matters to a Vote of Security Holders........... 12
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 13
Item 6. Selected Financial Data....................................... 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 14-16
Item 8. Financial Statements and Supplementary Data................... 16-30
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................... 30
PART III
Item 10. Directors and Executive Officers of the Registrant............ 31
Item 11. Executive Compensation........................................ 31
Item 12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 31
Item 13. Certain Relationships and Related Transactions................ 32
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................. 33-36
SIGNATURES................................................................ 37
-2-
<PAGE>
PART I
THE COMPANY
Quixote Corporation was originally incorporated under the laws of the State
of Delaware in 1969 as Energy Absorption Systems, Inc. In June, 1980, Energy
Absorption Systems, Inc. changed its name to Quixote Corporation. Unless
otherwise indicated herein, the terms "Quixote" and the "Company" refer to
Quixote Corporation and its subsidiaries.
Item 1. Business
- -----------------
Quixote Corporation and its subsidiaries develop, manufacture and market
energy-absorbing highway crash cushions and other highway safety products for
the protection of motorists and highway workers to both domestic and
international markets.
As of June 30, 1997, Quixote Corporation and its subsidiaries employed
373 people.
-3-
<PAGE>
HIGHWAY SAFETY DEVICES
- ----------------------
Description of Business
- -----------------------
The Company's business is life safety with its current operating subsidiaries
concentrating on safety problems and their solutions for the highways. There
are two broad categories of products for improving safety on the roads: products
which minimize the severity of crashes that occur and products designed to
prevent crashes from occurring.
In the category of reducing the severity of crashes, the patented highway crash
cushions manufactured by Energy Absorption Systems, Inc. were first conceived
and developed in 1969 in response to the high number of fatalities and serious
injuries suffered by occupants of errant vehicles in collisions with roadside
hazards, such as bridge abutments, overpass piers, overhead sign supports, lane
dividers, traffic islands and toll booths. Since that time, various types of
Energy Absorption's highway crash cushions have been installed in front of
thousands of life-threatening roadside hazards. The Federal Highway
Administration (FHWA) endorses the installation of highway crash cushions as an
effective safety program. Crash cushions have saved an estimated 28,000 lives
since 1969.
Energy develops, manufactures and markets a line of patented highway crash
cushion systems and other barriers which absorb and dissipate the force of
impact in collisions between vehicles and fixed roadside objects. The product
lines utilize the principles of momentum transfer and kinetic energy to safely
decelerate errant vehicles. Energy absorption or energy dissipation is
accomplished by using different combinations of water, aluminum, steel, urethane
foam systems, cardboard, plastic structures, elastometric cylinders and sand.
While Energy Absorption's products minimize the severity of crashes that occur,
the products of its wholly-owned subsidiary, Safe-Hit Corporation, prevent
crashes and help control the flow of traffic. Safe-Hit manufactures and markets
a line of flexible sign and guide post systems and a glare screen system through
distributors and catalog offerings. The guide posts are extruded from
polypropylene and are used to delineate a travel way, channelize vehicles or
mark the location of an object. The post features an in-ground anchor system
that permits inexpensive repair and replacement techniques. The glare screen
system, also made from polypropylene, is installed on top of median barriers to
eliminate the distraction of lights from oncoming vehicles on roads where the
inside lanes are adjacent to the median barrier. Both products are covered by
patents.
Spin-Cast Plastics, Inc., a wholly-owned subsidiary of Energy Absorption,
manufactures rotational molded plastic products including the
Energite-Registered Trademark- crash cushion system, plastic components used in
Energy Absorption's other product lines, as well as custom designed plastic
components for industrial products.
Products can be further broken down into permanent and construction zone
applications and, as such, are sold to those market segments. Most of the
products for permanent and construction zone applications are approved as
acceptable highway hardware according to procedures in the National Cooperative
Highway Research Project number 230 or 350 which provide various test levels
depending on the application. This approval is gained after a formal submission
to the FHWA makes the products eligible for federal aid highway projects.
Energy Absorption's products all have patented features and include the
truck-mounted attenuator (TMA-TM-), the QuadGuard-Registered Trademark-
System, the CushionWall-TM- , the BarrierGate-Registered Trademark-, the
Energite System-Registered Trademark- and the Triton Barrier-Registered
Trademark-.
Energy Absorption provides product education, selection and application
assistance. Energy Absorption generally does not perform site preparation or
installation for any of its products. They are performed through a
distributor/contractor network. Most of Safe-Hit's products are 'catalog type'
and sold through distributors.
Competition and Marketing
- -------------------------
-4-
<PAGE>
Energy Absorption's products are sold in all 50 U.S. states. Six regional
managers supervise 28 domestic distributors and make direct sales in areas not
covered by distributors. Although the Federal government provides matching
funds for the purchase of highway safety products made by state and local
governmental agencies, it is not a direct purchaser of Energy Absorption's
domestic products. Energy Absorption sells its products principally to either
distributors or to contractors (on behalf of state and local governments) with
less than 5% sold directly to state and local government agencies. Safe-Hit's
products are sold by their own regional mangers who supervise 48 domestic
distributors and make sales calls on certain state departments of transportation
and contracting firms.
Many international governments are now beginning to recognize the need for crash
cushions as a method of reducing traffic fatalities. Energy Absorption's
products are sold internationally through a network of 44 distributors who make
sales to municipal and national governments and contractors who are responding
to bids from their respective governments.
Although Energy does experience competition in specific product lines,
particularly in the Energite, G-R-E-A-T and TMA lines, no other company
presently markets as broad a line of highway crash cushion systems designed to
shield as large a variety of fixed roadside hazards. A number of other companies
manufacture flexible guide posts.
Government Policies
- -------------------
The market for crash cushions is directly affected by federal, state and local
governmental policies. A large portion of Energy Absorption's sales is
ultimately financed by funds provided to the states by the federal government.
Historically, these funds have covered 75% to 90% of the cost of highway safety
projects on roads constructed or maintained with federal assistance. The
Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), expiring on
September 30, 1997, provides authorization for federal funding of highways and
highway safety. Total funding of approximately $150 billion was available under
ISTEA over a six year period. The states must set aside 10% of the federal
funds received each year under ISTEA for safety construction activities such as
hazard elimination. In order for highway devices to be eligible for federal
funding, such devices must be approved by the FHWA. Energy Absorption is
obligated to seek such approval for improvements or upgrades to such devices and
for any new devices.
A new highway bill to replace ISTEA is currently being discussed in Congress.
While the Company believes that a new highway bill, or an extension of the
current ISTEA bill, will be signed into law, it appears likely it will be
delayed beyond September 30, 1997. Such a delay could cause an interruption in
federal funding and may result in a temporary lack of funds for Energy
Absorption's products.
-5-
<PAGE>
Backlog
- -------
As of June 30, 1997, 1996 and 1995, Energy had a backlog of unfilled orders for
highway safety devices of $8,999,000, $8,591,000 and $10,200,000, respectively.
The Company can usually fill an order within 6 to 8 weeks of receipt.
Research and Development; Patents
- ---------------------------------
Energy conducts its own research, development and testing of new products before
introducing them to the marketplace. The expenditures for research and
development activities were $2,209,000, $1,536,000 and $1,545,000, in the years
1997, 1996 and 1995, respectively.
Energy Absorption develops new products by working with federal and state
highway officials to determine highway traffic safety needs, and then designs
products to satisfy those needs. Energy is also active in promoting cooperation
among state highway agencies, contractors and engineers to encourage
comprehensive repair and maintenance of roadside crash attenuating systems. In
addition to developing new products within the impact technology area, Energy
Absorption is seeking to develop or to acquire new products which can be sold
through its existing distribution networks to its existing customers.
Energy owns a number of U.S. and foreign patents covering its major highway
safety products. It actively seeks patent and trademark protection for new
developments.
Raw Materials
- -------------
The principal raw materials used in the production of highway safety devices are
plastic and plastic resins, steel, aluminum and wood components. These raw
materials are purchased from various suppliers and have been readily available
throughout the last year. Energy believes that adequate supplies of these
materials will continue to be available.
Major Customers
- ---------------
No single customer of Energy Absorption's highway safety business represents a
significant portion of total revenues.
Other
- -----
Investment in FIP Joint Venture:
- --------------------------------
During fiscal 1996, Energy Absorption entered into a joint venture with FIP
Industriale S.p.A. of Italy to market their seismic bridge bearings in the
United States. The Company, accounting for this investment under the equity
method of accounting, took charges of $1,402,000 and $300,000 for 1997 and 1996
respectively. In June 1997, the Company decided to wind down the activities of
the joint venture due to the lack of revenues and progress to date. The 1997
charge includes $502,000 in accrued costs to exit this venture.
-6-
<PAGE>
COMPACT DISC MANUFACTURING
- --------------------------
In March 1997, the Company sold substantially all of the assets and transferred
significant operating liabilities of Disc Manufacturing, Inc. (DMI) to Cinram
Ltd. for $80,283,000 in cash. The transaction excluded DMI's Huntsville,
Alabama land and building as well as certain DMI litigation. DMI was one of
the largest independent manufacturers of compact discs and CD-Roms in the
United States.
LEGAL TECHNOLOGIES
- ------------------
During 1996, the Company discontinued the operations of its legal technologies
businesses, which had been involved in the development, manufacture and sale of
products and systems for the legal community. Under multiple arrangements the
Company sold certain assets of this segment for an aggregate sales price of
$5,981,000 and the assumption of certain liabilities. Liabilities retained by
the Company at June 30, 1997 include certain repetitive stress injury litigation
and liabilities under certain lease obligations.
-7-
<PAGE>
Item 2. Properties
- -------------------
Owned or
Location Available Space Purpose Leased
- -------- --------------- ------- --------
One East Wacker Drive 19,000 sq. ft. Executive Offices Leased
Chicago, Illinois
250 Bamberg Drive 160,000 sq. ft. Manufacture of highway Owned
Pell City, Alabama safety devices
3617 Cincinnati Avenue 22,000 sq. ft. Warehouse and research Owned
Rocklin, California and development facility
for highway safety
devices
3300 N. Kenmore Street 81,000 sq. ft. Sale and manufacture of Owned
South Bend, Indiana highway safety devices and
other plastic products
739 College Drive 28,000 sq. ft. Storage facility for Owned
South Bend, Indiana highway safety devices
1930 West Winton Avenue 20,000 sq. ft. Manufacture of extruded Leased
Hayward, California plastic highway safety
devices
4905 Moores Mill Road 332,000 sq. ft. Sublet Owned
Huntsville, Alabama
200 Corporate Pointe 19,800 sq. ft. Sublet Leased
Culver City, California
225 West Washington 5,300 sq. ft. Sublet Leased
Chicago, Illinois
Note: Present facilities are believed to be adequate to support the Company's
current and anticipated requirements.
-8-
<PAGE>
Item 3. Legal Proceedings
- --------------------------
A. DISC MANUFACTURING, INC. ET AL. v. MASSEY ET AL., CV-90-H-01029-NE (U.S.
District Court for the Northern District of Alabama). On May 21, 1990, Quixote
and Disc Manufacturing, Inc. ("DMI"), a discontinued operation, filed this
lawsuit against Disctronics Limited, Disctronics (US) Inc., Disctronics, Inc.,
Moray Investments Limited ("Moray"), Memory-Tech, Inc. ("Memory-Tech") and
individuals Peter Massey, Kevin Donovan, David Mackie, and Douglas Adams. This
lawsuit alleged that the individual defendants, each a DMI director until April
30, 1990, had in concert with Disctronics Limited and its affiliated companies
(the "Disctronics Group"), during the time that the Disctronics Group owned DMI,
misappropriated DMI's corporate opportunity to acquire Memory-Tech, a competing
compact disc manufacturer located in Plano, Texas. The lawsuit also alleged
that the defendants had violated DMI's federal trademark rights in the name
"Disctronics".
Certain of the defendants filed counterclaims alleging breach of contract,
economic duress, tortious interference with contract and business relations,
unjust enrichment, fraud, unfair competition and seizure of corporate
opportunity among other claims. On September 25, 1992, the Court dismissed all
of the defendants' state law counterclaims, in order to allow those claims to be
resolved in the parallel state court action. This left only the parties'
(including defendants') federal trademark/Lanham Act claims, which were stayed,
pending resolution of the state court action, described in B below.
B. DISC MANUFACTURING, INC. ET AL. v. MASSEY ET AL., CV90-1214L (Madison County
Circuit Court, Alabama). On June 13, 1990, DMI and Quixote refiled their state
law corporate opportunity claims (described in A above), along with a claim
under the Alabama trademark law, in the Circuit Court for Madison County,
Alabama (Huntsville), the jurisdiction in which DMI was located. Following a
preliminary injunction hearing, on July 30, 1990, the Court granted the motion
for preliminary injunction. In connection with the preliminary injunction and
pending the final outcome of the action, Quixote and DMI were required to post a
$6 million certificate of deposit as injunction security. (In March 1996, the
Court approved DMI's substitution of a $6 million surety bond backed by a
$2 million letter of credit to replace the certificate of deposit). The
defendants appealed the entry of the preliminary injunction and on May 15,
1992 the Alabama Supreme Court reversed the Circuit Court's issuance of the
injunction, remanding the case for further proceedings. Quixote sought a
rehearing which was denied on July 10, 1992. On May 21, 1992, defendants
filed a Motion for Partial Summary Judgment on all counts of the complaint,
asserting breaches of fiduciary duty and using as its basis the Alabama
Supreme Court decision.
In addition, on March 4, 1991, the corporate defendants filed a counterclaim
against Quixote, DMI and James H. DeVries. The counterclaim sought damages of
$73.8 million, to invalidate a 1989 Work-Out Agreement among the parties,
punitive damages and other relief.
In April 1993, the Company and DMI filed a First Amended Complaint which added
claims for unjust enrichment, fraud and tortious interference. Defendants moved
to dismiss the First Amended Complaint.
In May 1995, the Circuit Court ruled on various outstanding motions. The Court
dismissed all of the defendants' claims except the following claims: tortious
interference with contract and business relations; fraud; breach of contract
regarding a $300,000 escrow; a state dilution claim; and a claim for wrongfully
seeking injunctive relief.
In its May 1995 Order, the Circuit Court also dismissed all of the Company's and
DMI's corporate opportunity claims based on breaches of fiduciary duties, along
with the claims for unjust enrichment. This left two counts of the Company's
and DMI's First Amended Complaint in the case: a count for tortious
interference with contract and business relations and a count for fraud in
connection with the Disctronics' Memory-Tech Inc. transaction.
Both parties appealed the Court's May 1995 ruling. In September 1996, the
Alabama Supreme Court ruled on the appeal, reinstating all of DMI's claims which
had been dismissed by the Circuit Court except the corporate opportunity to
acquire Memory-Tech Inc. and unjust enrichment claims and upholding the
dismissal of all of the defendants' claims except a "palming off" claim related
to use of the name "Disctronics". Consequently, the Company
-9-
<PAGE>
and DMI have pending claims for breach of fiduciary duty, tortious
interference and fraud. The defendants' pending claims are for wrongful
injunction, "palming off", fraud, breach of contract and alleged interference
cclaims. Petitions for rehearing were denied in November 1996 and this
decision is now final.
Defendants subsequently filed an amended counterclaim without seeking leave of
court which seeks to assert in slightly different form generically some of the
same claims as previously asserted and against which judgment has already been
granted and become final. Quixote and DMI have moved to dismiss those claims.
Court ordered mediations have not been successful.
C. REPETITIVE STRESS INJURY LITIGATION. Stenograph Corporation, a
discontinued operation, is one of a number of manufacturers of keyboard and
other equipment that have been sued by individuals for arm, wrist and hand
injuries, including carpal tunnel syndrome. All thirty cases filed to date
against Stenograph, and in some cases the Company, contend that the
Stenograph machine (or other keyboard equipment) was defectively designed and
that Stenograph failed to provide adequate warnings about how the equipment
should be used to avoid injury. The cases request actual damages, in some
cases specified as ranging from $500,000 to $1,000,000, and, in most of the
cases, punitive damages, with some cases specifying an amount of $10,000,000.
Of the 30 cases, six were dismissed in April 1997 after a jury verdict in
favor of Stenograph and an appeal is pending.
In additions, six cases have been dismissed with prejudice and ten cases have
been dismissed without prejudice to refile the complaints. All of the cases
have been referred to the Company's insurance carriers and, at this time, the
Company believes that liability resulting from these cases, if any,
(excluding punitive damages) will be covered by its insurance policies.
D. RESORT VIDEO LTD. v. LASERVIDEO, INC. In September 1990, DMI was sued by
Resort Video, Ltd. in the Superior Court of the State of California for the
County of Los Angeles in an action entitled RESORT VIDEO, LTD. v. LASERVIDEO,
INC., No. 74659. Resort Video, a former start-up company, claimed DMI failed to
produce certain video discs on schedule, thereby injuring its business. After a
trial, on August 25, 1992, the jury awarded Resort Video $975,000 in damages.
DMI moved for a new trial which was granted in October 1992. Plaintiff appealed
that decision and DMI cross-appealed the jury's decision. In June 1995, the
California Court of Appeals affirmed the trial court's order granting a new
trial based on excessive damages. Resort Video's petition for a rehearing was
denied. Accordingly, the case has been returned to the trial court and a trial
on damages is set to begin in February 1998.
E. THOMSON S.A. v TIME WARNER, ET AL. In February 1994, Disc Manufacturing,
Inc., Quixote Corporation and a number of other companies were sued by Thomson
S.A. of France in the United States District Court for the District of Delaware
in an action entitled THOMSON S.A. v. TIME WARNER, INC., ET AL., No 94-83. The
complaint charged that the defendants infringed four Thomson patents by making
and selling audio compact discs and requested an order prohibiting defendants
from making or selling compact discs which infringe on the patents. No
specified damages were asked for although the complaint asked that damages be
trebled because it alleged the infringement was willful. In the fall of 1994,
the Denon and Time Warner defendants entered into consent judgments with the
plaintiff. After a trial, in July 1996, the jury found that the Thomson patents
were invalid. Thomson moved for judgment as a matter of law or, in the
alternative, for a new trial, which was denied. In July 1997, Thomson filed an
appeal which is pending.
-10-
<PAGE>
F. DISCOVISION ASSOCIATES v. DISC MANUFACTURING, INC. In January 1995, Disc
Manufacturing, Inc. was served in an action entitled DISCOVISION ASSOCIATES v.
DISC MANUFACTURING, INC., Case No. 95-21, U.S. District Court for the District
of Delaware. The complaint alleges that DMI is infringing six DiscoVision
patents relating to optical storage discs by the manufacture and sale of compact
discs and seeks injunctive relief and unspecified damages, including punitive
damages, against DMI. In August 1995, DiscoVision was granted leave to amend
its complaint to allege infringement by DMI of four additional patents.
Plaintiffs subsequently dropped four patents from the case leaving six patents
in issue. In April 1997, the District Court denied a motion by DiscoVision to
dismiss portions of the DMI antitrust case. In August 1997, the District Court
granted a motion by DMI to limit the time period for which damages could be
asserted against DMI and denied DMI's motion to assert the doctrine of laches.
The District Court, in September 1997, deconsolidated DMI's antitrust claims for
purposes of trial and issued its determination on claims interpretation. Trial
is set to begin in October 1997.
G. DISC MANUFACTURING, INC. v. PIONEER AND DISCOVISION. In January 1995, DMI
filed a complaint against Pioneer Electronic Corp., Pioneer Electronics (USA)
Inc., Pioneer Capital Inc., and DiscoVision Associates in the U.S. District
Court for the Central District of California, Case No. 95-0306, alleging
violations of the antitrust laws and acts of unfair competition based on
unlawful activities and anticompetitive tactics involving patents related to
optical disc technology. DMI's complaint seeks damages, including punitive
damages, and injunctive relief. This case has been transferred to the District
Court in Delaware and consolidated with DiscoVision Associates' case against DMI
pending in that jurisdiction (described in F. above).
H. ESTATE OF THIEL v. ENERGY ABSORPTION SYSTEMS, INC. In December 1994, Energy
Absorption Systems, Inc. was served in an action entitled FREDERICK W. THIEL AND
MAUREEN THIEL v. SLATTERY ASSOCIATES ET AL., Superior Court of New Jersey,
Docket No. MRS-L-1431-94. The complaint arises from a March 1992 accident in
which the decendent lost control of his car and allegedly struck one of Energy's
crash cushions. The complaint seeks unspecified damages from Energy Absorption
and numerous defendants, including the State of New Jersey, the U.S. Federal
Highway Administration and various other governmental entities. The Company has
referred the case to its insurance carrier. At this time, the Company believes
that liability resulting from this case, if any, will be covered by its
insurance policies. Trial is scheduled for January 1998.
I. ENERGY ABSORPTION SYSTEMS, INC. v. ROADWAY SAFETY. In April 1993, Energy
filed suit in U.S. District Court for the Northern District of Illinois in an
action entitled ENERGY ABSORPTION SYSTEMS, INC. v. ROADWAY SAFETY SERVICE,
INC., No. 93C 2147 for infringement of Energy's U.S. Patent No. 4,289,419
seeking damages and an injunction. Roadway counterclaimed for a declaratory
judgment of non-infringement and invalidity. In February 1996, the District
Court entered judgment in favor of Roadway, holding that Energy's patent was
invalid and not infringed and awarded attorneys' fees and costs to Roadway.
The District Court later determined the award to be $280,386. Energy
Absorption filed an appeal and was successful in obtaining a decision from
the Court of Appeals for the Federal Circuit reversing the District Court's
judgments of invalidity, unenforceability and award of attorney's fees to
Roadway. The Court of Appeals affirmed and modified the District Court
judgment of literal non-infringement and remanded for consideration of
infringement under the doctrine of equivalents.
J. ERNEST CHICO v. ENERGY ABSORPTION SYSTEMS, INC. On April 12, 1996 Energy
Absorption Systems, Inc. was served in an action entitled ERNEST CHICO V. THE
STATE OF INDIANA, ENERGY ABSORPTION SYSTEMS, INC. AND HOOSIER COMPANY IN LAKE
SUPERIOR COURT FOR THE STATE OF INDIANA, CAUSE NO. 45DO2-9605-CT-391 which
arises from an accident in which the plaintiff hit one of Energy's crash
cushions. The Company has referred the case to its insurance carrier and at
this time believes that liability resulting from this case will be covered by
its insurance policies. The Company has filed a motion for summary judgment
which is pending.
-11-
<PAGE>
K. FEATHER V. ENERGY ABSORPTION SYSTEMS, INC., In July 1997, plaintiff filed
this action in Superior Court of the State of California, Case No. SCV-6077 in
an action entitled SUSAN FEATHER V. ENERGY ABSORPTION SYSTEMS, INC. ET AL.
Plaintiff claims special, general and punitive damages because of sexual
discrimination/harassment, retaliation, intentional infliction of emotional
distress, negligent infliction of emotional distress, and constructive discharge
while an employee of Energy Absorption. The Company believes that most of the
claims will be covered by its insurance policies. Discovery is proceeding.
The Company is involved in other legal actions, believes it has defenses for
all claims, and is vigorously defending the actions. In the opinion of
management, based on the advice of legal counsel, liabilities, if any,
arising from the Company's legal actions should not have a material effect on
the Company's results of operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
-12-
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
- -------------------------------------------------------------------------------
The Company's common stock is quoted on the National Association of Securities
Dealers Automated Quotation System (NASDAQ) under the symbol QUIX.
Set forth are the daily high and low last sales prices for the Company's common
stock for the periods indicated, as reported by the National Quotations Bureau,
Inc. These prices represent quotations between dealers in securities, do not
include retail markdowns or commissions, and do not necessarily represent actual
transactions.
Quarter Ending 9/30 12/31 3/31 6/30
- -------------- ------- ------- -------- -------
FISCAL 1997
High $ 8 $10-3/4 $ 9-7/8 $ 9-1/8
Low 5-3/4 7-5/8 8-1/4 6-3/4
FISCAL 1996
High $13-1/4 $ 12 $ 8-1/2 $ 8-1/2
Low 10-1/2 7-1/4 6 5-3/4
The current quoted price of the stock is listed daily in The Wall Street
Journal in the NASDAQ National Market System section. As of August 4, 1997,
there were approximately 5,775 shareholders including holders of shares held
in street name.
Dividend Policy
- ---------------
During 1997, the Company declared semiannual cash dividends of twelve cents
and thirteen cents per share each. During 1996, the Company declared
semiannual cash dividends of twelve cents per share each.
Item 6. Selected Financial Data
- --------------------------------
SELECTED FINANCIAL DATA
Dollar amounts in thousands, except per share data
<TABLE>
<CAPTION>
For the years ended June 30, 1997 1996 1995 1994 1993
- ---------------------------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Operating results:
Net sales $ 45,037 $ 46,750 $ 46,522 $ 43,433 $ 35,648
Gross profit 22,249 24,291 23,382 23,453 20,454
Selling and administrative expenses 14,264 15,059 13,662 13,825 11,146
Research and development 2,209 1,536 1,545 1,978 2,092
Other expense (2,112) (488) (1,887) (928) (605)
Earnings from continuing operations 2,907 4,390 4,470 4,989 3,342
Net (loss) earnings (3,831) (9,892) 5,950 11,644 9,441
Per share data:
Primary earnings from continuing operations $ .36 $ .55 $ .55 $ .62 $ .42
Net (loss) earnings (.48) (1.24) .73 1.44 1.20
Book value per common share 5.24 5.99 7.49 6.94 5.53
Cash dividends per common share .25 .24 .22 .21 .20
Weighted average common and common equivalent shares
outstanding 8,008,893 8,003,924 8,100,385 8,066,192 7,867,658
Financial position:
Total assets $ 55,220 $118,888 $135,662 $ 98,999 $ 88,202
Working capital 20,639 4,055 5,541 8,204 6,981
Net property, plant and equipment 12,903 13,113 10,645 8,532 8,075
Long-term debt, net 0 58,000 68,000 38,975 40,000
Shareholders' equity 41,655 47,619 58,915 54,069 41,898
</TABLE>
NOTE: OPERATING RESULTS AND FINANCIAL POSITION FOR ALL PERIODS PRESENTED HAVE
BEEN RESTATED TO REFLECT THE LEGAL TECHNOLOGIES AND DISC MANUFACTURING SEGMENTS
AS DISCONTINUED OPERATIONS.
-13-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
- -------------
1997 Compared to 1996
- ---------------------
The Company's sales for 1997 decreased 4% to $45,037,000 from $46,750,000 in
1996. Sales declined in Energy Absorption's permanent system product lines
which include the G-R-E-A-T-Registered Trademark- System as well as the newly
introduced QuadGuard-Registered Trademark- System. This was due to, among
other things, increased competition which resulted in a decline in selling
prices and to a lesser extent, a decrease in unit volume. In addition, the
Company believes that some customers may have postponed their purchases
earlier in 1997 in anticipation of several new products introduced by Energy
Absorption that qualify under the new federal testing and evaluation
guidelines known as NCHRP 350, coupled with a delay in certifying one of
these new products. Sales of the Triton Barrier-Registered Trademark- and
Safe-Hit delineator also declined. Somewhat offsetting these product line
decreases were increases in the Energite7 III and truck-mounted attenuator
(TMA) product lines.
The gross profit margin in 1997 decreased to 49.4% from 52.0% in 1996. This
was due to a decrease in the average selling prices of its permanent systems
products and to a lesser extent, lower sales volume. In addition, the gross
margin also declined due to increased overhead from the expansion of Energy
Absorption's Pell City, Alabama facility which was doubled in size to 150,000
square feet.
Selling and administrative expenses in 1997 decreased 5% to $14,264,000 from
$15,059,000 in 1996. This decrease was due principally to last year's
$800,000 write-off to discontinue the Company's sewer rehabilitation
business. Corporate level administrative expenses remained at a level
consistent with last year.
Research and development expenses in 1997 increased 44% to $2,209,000
compared to $1,536,000 in 1996. This increase was due to expenditures for
the development of new products as well as for the upgrade of the Company's
existing product lines in order to meet the revised NCHRP 350 standards.
These new Federal Highway Administration guidelines increase the safety
standards to accommodate heavier and higher center of gravity vehicles such
as sport utility vehicles.
Interest income in 1997 was $339,000 compared to $358,000 in 1996. The
interest income in 1997 was earned on the Company's cash of approximately $18
million which is being invested in short-term money market instruments until
it can be effectively deployed in the business. The 1996 interest income is
the result of the interest earned on a $6 million certificate of deposit
posted as injunction security for certain litigation. This certificate of
deposit was redeemed in the third quarter of 1996 and replaced with a surety
bond backed by a letter of credit. Interest expense in 1997 decreased 71% to
$497,000 from $1,726,000 in 1996. This was due to a decrease in the average
long-term debt outstanding in 1997 compared to 1996. As discussed below in
"Liquidity and Capital" Resources, the Company paid off all long-term debt
upon the sale of DMI in March 1997. In addition, as a result of the sale of
DMI, total interest expense was allocated between continuing and discontinued
operations based upon the net asset values of each. The Company recorded a
loss of $1,402,000 in 1997 related to the Company's investment in a seismic
bridge bearing joint venture with FIP Industriale S.p.A. This compares to a
$300,000 loss from this venture in 1996. Due to the lack of sales and
progress to date, the Company has decided to cease funding of this venture.
Other expenses were $552,000 in 1997 compared to $454,000 in 1996.
The Company's effective tax rate decreased in 1997 to 20.7% from 39.1% in
1996 due to the realization of certain tax benefits in the current year along
with the settlement of certain tax contingencies.
As discussed in Note 3 to the Consolidated Financial Statements, on March 27,
1997, the Company sold substantially all of the assets and transferred
significant operating liabilities of DMI to Cinram Ltd. for $80.3 million in
cash. The transaction excludes the Huntsville, Alabama land and building as
well as certain DMI litigation. The sale, approved by the Company's
shareholders, resulted in a loss of $4,507,000 which was net of
-14-
<PAGE>
income tax benefits of $3,004,000. DMI incurred a loss on operations for
1997 and 1996 of $2,231,000 and $1,816000 which are net of income tax
benefits of $957,000 and $1,888,000 respectively. These results are
presented as discontinued operations in the Company's Consolidated Statements
of Operations.
The Company used a portion of the proceeds of the sale to repay all of its
$37.2 million in bank debt, to redeem all of its $18 million of 8%
Convertible Subordinated Debentures and the related accrued interest and to
pay transaction costs. The balance of the proceeds will be to invest in the
highway safety and equipment business and in other opportunities deemed
beneficial to stockholders, including the possible repurchase of a portion of
the Company's common stock outstanding.
1996 COMPARED TO 1995
- --------------------------------------------------------
The Company's sales for 1996 increased slightly to $46,750,000 from
$46,522,000 in 1995. Sales of Energy Absorption's permanent system product
lines increased including the G-R-E-A-T-Registered Trademark- System and
G-R-E-A-T-Registered Trademark- CZ products as well as parts sales but were
mostly offset by a decrease in TMA sales. Sales of the Energite-Registered
Trademark- also declined in 1996.
The gross profit margin in 1996 increased to 52.0% from 50.3% in 1995. This
was due to a change in product mix and also to less outsourcing of component
parts in 1996 than in 1995 as a result of the completion of Energy
Absorption's plant expansion in 1996.
Selling and administrative expenses in 1996 increased 10% to $15,059,000 from
$13,662,000 in 1995 due to an increase in marketing expenses and to the
write-off of the investment in a sewer rehabilitation technology of $800,000.
Corporate level expenses in 1996 remained at a level consistent with 1995.
Research and development expenses in 1996 declined slightly to $1,536,000
compared to $1,545,000 in 1995. The Company increased R&D expenditures which
were targeted towards the upgrade of its product line in order to meet the
revised NCHRP 350 guidelines. These increased R&D expenditures were largely
offset by the suspension in development activities related to the Company's
sewer rehabilitation technology.
Interest income in 1996 was $358,000 compared to $392,000 in 1995. Interest
income in both years relates to interest earned on a $6 million certificate
of deposit posted as injunction security for certain litigation. This
certificate of deposit was redeemed in the third quarter of 1996. Interest
expense in 1996 decreased 13% to $1,726,000 from $1,976,000 in 1995. This
was due to a decrease in the average long-term debt outstanding in 1996
compared to 1995. In addition, total interest expense was allocated between
continuing and discontinued operations based upon the net asset values of
each. Other expenses were $454,000 in 1996 compared to $303,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------------------------------------------
The Company had cash and cash equivalents of $18,463,000 and access to
additional funds of $40,000,000 under its bank arrangements as of June 30,
1997. Operating activities used cash of $607,000 during 1997 due principally
to the losses on the operations and sale of DMI.
Cash of $78,103,000 was provided by investing activities during the year.
This was due principally to the sale of DMI which was completed in March of
this year and which generated $80,283,000 in cash. Offsetting this somewhat,
the Company invested $1,321,000 in equipment for its highway safety business.
Cash of $900,000 was used related to the Company's investment in the FIP
joint venture. Other miscellaneous activity provided cash of $41,000.
Financing activities used cash of $60,370,000 principally to repay all of the
Company's bank debt of $40,000,000 and to redeem all of its 8% Convertible
Subordinated Debentures of $18,000,000. The Company also used cash to pay
semiannual cash dividends of $1,903,000. In addition, cash of $655,000 was
used to purchase 88,514 shares of the Company's own Common Stock for the
treasury. Additional shares may be purchased from time to time. Cash of
$188,000 was received for the exercise of stock options.
-15-
<PAGE>
During fiscal 1998, the Company anticipates needing less than $2,000,000 in
cash for capital expenditures. The Company may also need cash as it
considers acquiring additional businesses that complement its existing
operations. Also, the Company will require additional investments in working
capital to maintain growth and to fund certain obligations related to its
discontinued operations. In addition, the Company may need funds to
repurchase its own stock from time to time. These expenditures will be
financed either through the Company's invested cash, cash generated from its
operations, or from borrowings available under the Company's revolving credit
facility. The Company believes its existing cash, cash generated from
operations and funds available under its existing credit facility are
sufficient for all planned operating and capital requirements.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
Report of Independent Accountants
To the Shareholders and the Board of Directors
of Quixote Corporation
We have audited the consolidated balance sheets of Quixote Corporation and
Subsidiaries as of June 30, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the
three years in the period ended June 30, 1997. We have also audited the
financial statement schedule listed in Park IV of Form 10-K, Item 14(a)2 for
each of the three years in the period ended June 30, 1997. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Quixote
Corporation and Subsidiaries as of June 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
/s/Coopers & Lybrand L.L.P.
Chicago, Illinois
August 8, 1997
-16-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Dollar amounts in thousands, except per share data
For each of the three years ended June 30, 1997 1996 1995
- ------------------------------------------ --------- --------- ----------
Net sales................................. $ 45,037 $ 46,750 $ 46,522
Cost of sales............................. 22,788 22,459 23,140
--------- --------- ----------
Gross profit.............................. 22,249 24,291 23,382
Operating expenses:
Selling and administrative.............. 14,264 15,059 13,662
Research and development................ 2,209 1,536 1,545
--------- --------- ----------
16,473 16,595 15,207
--------- --------- ----------
Operating profit.......................... 5,776 7,696 8,175
Other income (expense):
Interest income......................... 339 358 392
Interest expense........................ (497) (1,726) (1,976)
Gain on sales of assets................. 1,634
Loss on investment in FIP joint venture (1,402) (300)
Other................................... (552) (454) (303)
--------- --------- ----------
(2,112) (488) (1,887)
--------- --------- ----------
Earnings from continuing operations
before provision for income taxes....... 3,664 7,208 6,288
Provision for income taxes................ 757 2,818 1,818
--------- --------- ----------
Earnings from continuing operations....... 2,907 4,390 4,470
Discontinued operations:
(Loss) earnings from operations,
net of income taxes.................. (2,231) (3,369) 1,480
Loss on disposal, net of income taxes (4,507) (10,913)
--------- --------- ----------
(Loss) earnings from discontinued
operations........................... (6,738) (14,282) 1,480
--------- --------- ----------
Net (loss) earnings....................... $ (3,831) $ (9,892) $ 5,950
========= ========= ==========
Primary earnings per share:
Earnings from continuing operations.. $ .36 $ .55 $ .55
========= ========= ==========
Net (loss) earnings.................. $ (.48) $ (1.24) $ .73
========= ========= ==========
Weighted average common and
common equivalent shares outstanding 8,008,893 8,003,924 8,100,385
========= ========= ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-17-
<PAGE>
CONSOLIDATED BALANCE SHEETS
As of June 30,
Dollar amounts in thousands, except per share data 1997 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents...................... $ 18,463 $ 1,337
Accounts receivable, net of allowance for doubtful
accounts of $165 in 1997 and 1996............ 8,494 9,042
Refundable income taxes........................ 1,329 3,016
Inventories.................................... 4,224 3,356
Deferred income tax assets..................... 887
Other current assets........................... 241 490
--------- ---------
Total current assets......................... 33,638 17,241
Property, plant and equipment at cost:
Land........................................... 1,215 1,215
Buildings and improvements..................... 8,691 8,562
Machinery and equipment........................ 8,118 8,219
Furniture and fixtures......................... 2,812 2,659
Leasehold improvements......................... 519 493
--------- ---------
21,355 21,148
Less: accumulated depreciation and amortization (8,452) (8,035)
--------- ---------
12,903 13,113
Other assets..................................... 2,765 3,158
Assets of discontinued operations................ 5,914 85,376
--------- ---------
$ 55,220 $ 118,888
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $1,743 $1,006
Dividends payable.............................. 1,039 946
Accrued expenses:
Payroll and commissions...................... 1,366 1,466
Other........................................ 2,802 2,524
Liabilities of discontinued operations......... 6,049 7,244
--------- ---------
Total current liabilities.................... 12,999 13,186
Long-term debt................................... 58,000
Deferred income tax liabilities.................. 566 83
Commitments and contingent liabilities...........
Shareholders' equity:
Preferred stock, no par value;
authorized 100,000 shares; none issued
Common stock, par value $.01-2/3; authorized
15,000,000 shares; issued 8,753,333
shares - 1997 and 8,671,101 shares - 1996... 146 145
Capital in excess of par value of stock........ 30,269 29,751
Retained earnings.............................. 17,368 23,196
Treasury stock, at cost, 807,435 shares -
1997 and 718,921 shares - 1996.............. (6,128) (5,473)
--------- ---------
Total shareholders' equity.................. 41,655 47,619
--------- ---------
$ 55,220 $ 118,888
========= ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-18-
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the three years ended June 30, 1997
<S> <C> <C> <C> <C>
Capital in
Common Excess of Par Retained Treasury
Stock Value of Stock Earnings Stock
--------- -------------- --------- ---------
Dollar amounts in thousands, except per share data:
BALANCES, JULY 1, 1994..................................... $ 142 $28,551 $ 30,749 $ (5,373)
Exercise of options for 41,922 common shares............... 285
Net earnings - 1995........................................ 5,950
Declaration of semiannual cash dividends
($.11 per share each).................................... (1,722)
Issuance of 34,679 shares pursuant
to the stock retirement plan............................. 1 432
Purchase of 6,661 common shares at $15.01
per share................................................ (100)
--------- -------------- --------- ---------
BALANCES, JUNE 30, 1995.................................... 143 29,268 34,977 (5,473)
Exercise of options for 55,006 common shares............... 1 250
Net loss - 1996............................................ (9,892)
Declaration of semiannual cash dividends
($.12 per share each).................................... (1,889)
Issuance of 34,679 shares pursuant
to the stock retirement plan............................. 1 233
--------- -------------- --------- ---------
BALANCES, JUNE 30, 1996.................................... 145 29,751 23,196 (5,473)
Exercise of options for 39,847 common shares............... 188
Net loss - 1997............................................ (3,831)
Declaration of semiannual cash dividends................... (1,997)
($.12 per share and $.13 per share)......................
Issuance of 42,385 shares pursuant
to the stock retirement plan............................. 1 330
Purchase of 88,514 common shares at
$7.25 to $8.00 per share................................. (655)
--------- -------------- --------- ---------
BALANCES, JUNE 30, 1997
8,753,333 common shares and
807,435 treasury shares................................. $ 146 $ 30,269 $ 17,368 $ (6,128)
========= ============== ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-19-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years ended June 30,
Dollar amounts in thousands 1997 1996 1995
---------- -------- -------
Earnings from continuing operations......... $ 2,907 $ 2,574
Discontinued operations
Loss from operations, net of income taxes (2,231) (1,553)
Loss on disposal, net of income taxes (4,507) (10,913)
---------- -------- -------
Net (loss) earnings......................... (3,831) (9,892) $ 5,950
ADJUSTMENTS TO RECONCILE NET (LOSS) EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization............. 1,882 14,451 15,583
Provision for losses on accounts receivable (71) (27)
Deferred income taxes..................... (404) (1,909) (1,081)
Changes in operating assets and liabilities:
Accounts receivable.................... 548 2,202 (68)
Refundable income taxes................ 1,687 (3,016)
Inventories............................ (868) 1,448 (2,254)
Other current assets................... 249 (1,505) (528)
Accounts payable and accrued expenses.. 744 (1,769) 3,542
Income taxes payable................... (4,110) 188
Discontinued operations-noncash charges
and working capital changes........... (2,016) 18,348
Loss on investment in the FIP joint venture 1,402 300
Gain on sale of Quantic Industries, Inc... (1,287)
Gain on sale of patent.................... (347)
Loss on sewer rehabilitation business..... 601
---------- -------- -------
Net cash provided by (used in)
operating activities................. (607) 13,444 21,305
---------- -------- -------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,321) (24,419) (38,415)
Proceeds from sales of discontinued operations 80,283 5,981
Investment in the FIP joint venture....... (900) (300)
Proceeds from sale of investment in
Quantic Industries, Inc................. 8,050
Proceeds from sale of patent.............. 1,960
Capitalized and purchased systems,
design and software costs............... (308)
Decrease (increase) in funds deposited
with IDB trustee........................ 2,719 (2,719)
Cash paid for acquired businesses and
equity investments...................... (6,746)
Other..................................... 41 (731) (421)
---------- -------- -------
Net cash provided by (used in)
investing activities 78,103 (6,740) (48,609)
---------- -------- -------
FINANCING ACTIVITIES:
Payments on revolving credit agreement.... (52,050) (32,000) (12,000)
Proceeds from revolving credit agreement.. 12,050 23,000 42,000
Payments on convertible debentures........ (18,000) (1,975)
Proceeds from redemption of
certificate of deposit.................. 6,000
Payment of semi annual cash dividend...... (1,903) (1,805) (1,714)
Proceeds from exercise of common stock options 188 251 285
Repurchase of common stock for the treasury (655) (100)
---------- -------- -------
Net cash provided by (used in)
financing activities.................. (60,370) (6,529) 28,471
---------- -------- -------
Net change in cash and cash equivalents..... 17,126 175 1,167
Cash and cash equivalents at beginning of year 1,337 2,075 1,021
---------- -------- -------
Cash and cash equivalents at end of year.... $ 18,463 $ 2,250 $ 2,188
========== ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-20-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Quixote Corporation and its subsidiaries develop, manufacture and market
energy-absorbing highway crash cushions and other highway safety products for
the protection of motorists and highway workers to both domestic and
international markets.
2. ACCOUNTING POLICIES
The principal accounting policies of the Company are as follows:
CONSOLIDATION
The consolidated financial statements include the accounts of Quixote
Corporation and its wholly-owned subsidiaries.
CASH AND CASH EQUIVALENTS
Cash in excess of operating requirements is invested in income-producing
investments generally having initial maturities of three months or less.
These investments are stated at market value. The Company considers these
short-term instruments to be cash equivalents.
Cash and cash equivalents in the consolidated statement of cash flows for
1996 and 1995 includes cash related to discontinued operations.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
PROPERTY, PLANT AND EQUIPMENT
The Company capitalizes expenditures for major renewals and betterments and
charges current operations with the cost of maintenance and repairs.
Provisions for depreciation and amortization have been computed on the
straight-line method based on the expected useful lives of the assets as
indicated below:
Buildings and improvements 10 to 40 years
Machinery and equipment 3 to 12 years
Furniture and fixtures 3 to 10 years
Leasehold improvements 5 to 10 years
The cost and accumulated depreciation and amortization relating to assets
retired or otherwise disposed of are eliminated from the respective accounts
at the time of retirement or other disposition with the gain or loss credited
or charged to earnings.
GOODWILL AND PATENTS
Goodwill and patents are amortized on a straight-line basis over lives of 7
to 20 years. The Company assesses at each balance sheet date whether there
has been a permanent impairment in the value of these assets. Such
assessment includes consideration of possible obsolescence, demand, new
technology, competition, and other pertinent economic factors and trends that
may have an impact on the value or remaining lives of these assets.
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
-21-
<PAGE>
In addition, the amount of any future tax benefits are reduced by a valuation
allowance to the extent such benefits are not expected to be fully realized.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements.
Management's estimates also affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, Earnings per Share (FAS
128), which specifies the computation, presentation, and disclosure
requirements for earnings per share in order to simplify the computation of
earnings per share. FAS 128 is effective for financial statements ending
after December 15, 1997 and earlier application is not permitted. After the
effective date, all prior period earnings per share data shall be restated to
conform with the provisions of FAS 128. The adoption of FAS 128 is not
expected to have a material impact on the Company's earnings per share data.
Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure, (FAS 129), was also issued in February
1997 and is effective for periods ending after December 15, 1997. This
statement establishes standards for disclosing information about an entity's
capital structure by superseding and consolidating previously issued
accounting standards. The financial statements of the Company are prepared
in accordance with the requirements of FAS 129.
In June 1997, the FASB issued FAS 130, Reporting Comprehensive Income. This
statement, effective for fiscal years beginning after December 15, 1997,
would require the Company to report components of comprehensive income in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income is defined by Concepts Statement
No. 6, Elements of Financial Statements, as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The Company has not yet determined its
comprehensive income.
Also in June 1997, the FASB issued FAS 131, Disclosures about Segments of an
Enterprise and Related Information. This statement, effective for financial
statements for periods beginning after December 15, 1997, requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. Generally, financial information is
required to be reported on the basis that it is used internally for
evaluating segment performance and deciding how to allocate resources to
segments. The Company is evaluating the effects of this pronouncement.
RECLASSIFICATIONS
Certain amounts for the years ended June 30, 1996 and 1995 were reclassified
to conform to the current year presentation. These reclassifications did not
affect net income.
3. ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS
In March 1997, the Company sold substantially all of the assets and
transferred significant operating liabilities of Disc Manufacturing, Inc.
(DMI) to Cinram Ltd. for $80,283,000 in cash. The transaction excluded DMI's
Huntsville, Alabama land and building as well as certain DMI litigation. The
sale, approved by the Company's shareholders, resulted in a loss of
$4,507,000 which was net of income tax benefits of $3,004,000. In connection
with the sale, stock and cash awards of approximately $1,200,000 were made to
certain employees of the Company.
-22-
<PAGE>
During 1996, the Company discontinued the operations of its legal
technologies businesses, which had been involved in the development,
manufacture and sale of products and systems for the legal community. Under
multiple arrangements the Company sold certain assets and liabilities for an
aggregate sales price of $5,981,000. The loss on disposal of $10,913,000 is
net of income tax benefits of $7,275,000.
The accompanying consolidated balance sheets and consolidated statements of
operations have been restated in order to present the compact disc and legal
technologies segments as discontinued operations for accounting purposes. As
part of this restatement, interest expense was allocated between continuing
and discontinued operations based upon the net assets of each.
The income tax provisions (benefits) for the results of discontinued
operations for the years ended 1997, 1996 and 1995 are ($957,000),
($2,613,000) and $1,407,000, respectively. Net sales for the discontinued
businesses were $66,206,000 (1997), $109,919,000 (1996) and $138,889,000
(1995).
As of June 30, 1997, the following assets and (liabilities) relate to
discontinued operations:
Dollar amounts in thousands
Land and building (net) $ 7,501
Deferred income taxes 4,073
Accrued legal and accounting (5,320)
Lease obligations (2,590)
Accrued royalties (848)
Severance (280)
Other accruals (2,671)
--------
Net liabilities of discontinued
operations $ (135)
========
These remaining assets and liabilities are valued based upon management's
estimates, utilizing currently available information as of the balance sheet
date. It is reasonably possible, however, that these estimates could change
materially.
During 1996; Energy Absorption entered into a joint venture with FIP
Industriale S.p.A. of Italy to market their seismic bridge bearings in the
United States. The Company, accounting for this investment under the equity
method of accounting, took charges of $1,402,000 and $300,000 for 1997 and
1996 respectively. In June 1997 the Company decided to wind down the
activities of the joint venture due to the lack of revenues and progress to
date. The 1997 charge includes $502,000 in accrued costs to exit this
venture.
In January 1996, the Company sold to Barrier Systems, Inc. certain patents
related to its movable traffic barrier system. The sale price of $1,960,000
resulted in a gain of $347,000 which is included in other income for 1996.
In April 1995 the Company acquired a 40% common stock interest in Quantic
Industries, Inc. for $6.7 million including expenses. The investment in
Quantic, a manufacturer of electronic and pyrotechnic devices, was accounted
for under the equity method of accounting. In May 1996 the Company agreed to
sell its 40% interest to the majority shareholders in Quantic for $8,050,000
cash. A gain of $1,287,000 was realized on the sale and is included in other
income for 1996.
-23-
<PAGE>
4. INVENTORIES
Inventories consist of the following at June 30:
Dollar amounts in thousands 1997 1996
-------- --------
Finished Goods $ 832 $ 713
Work-in-process 978 627
Raw materials 2,414 2,016
--------- ---------
$ 4,224 $ 3,356
========= =========
5. LONG-TERM DEBT
Long-term debt consists of the following at June 30:
Dollar amounts in thousands 1997 1996
-------- --------
Revolving credit note due October 31,
2000, interest at variable rates $ 0 $ 40,000
8% Convertible subordinated
debentures due 2011, interest due
semiannually, principal payable in
annual sinking fund installments
of $1,000 0 18,000
-------- --------
Total long-term debt $ 0 $ 58,000
======== ========
The Company has a three-year unsecured revolving credit agreement with three
banks. The agreement provides for a $40 million credit facility and contains
both fixed and floating interest rate options, at the prime rate or lower,
and contains affirmative and negative covenants including requirements that
the Company maintain certain financial ratios and be profitable from
continuing operations each year. The agreement may be extended one
additional year on each anniversary date upon mutual consent of the Company
and the banks.
At any time during the three years, the Company may elect to
convert the loan to a four year term with equal quarterly principal payments
due throughout the term to amortize the loan in full.
In April 1997, the Company redeemed its convertible subordinated debentures
at face value plus accrued interest. The debentures were convertible by the
holders at any time prior to maturity into shares of common stock of the
Company at a conversion price of $19.00 per share. Unamortized costs
incurred in issuing the debentures at June 30, 1996 were $464,000 and are
included in other assets. The fair value of the debentures outstanding at
June 30, 1996 is estimated to be $15,840,000 using available market
information at that time.
During 1996 the Company satisfied its sinking fund requirements for both 1996
and 1997 through the purchase of its debentures on the open market. The
gain of $257,000 is included in other income in 1996.
6. STOCK OPTIONS AND STOCK TRANSACTIONS
The Company has stock option plans for directors and employees providing for
grants of options as may be determined by the Audit/Compensation Committee of
the Board of Directors. Options under the Long-Term Stock Ownership
Incentive Plan and the Director Stock Option Plan are to be granted at no
less than 100% of the current market price at the date of the grant. No
charges are made to earnings in connection with the options.
-24-
<PAGE>
Information for the year ended June 30, 1997 with respect to options under
the Company's plans is as follows:
Number of Option Price
Shares per Share
--------- -----------------
Shares under option:
July 1, 1996 897,949 $ 4.25 to $ 21.00
Granted 137,000 9.00
Exercised ( 54,500) 4.25 to 6.88
Cancelled or expired (108,175) 4.25 to 12.63
---------
June 30, 1997 872,274 $ 4.25 to $ 21.00
=========
Options outstanding at June 30, 1997 are all currently exercisable. As of
June 30, 1997, the Company has 968,090 common shares reserved for various
conversion privileges and options.
During 1997, the Company was required to adopt Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (FAS
123), which encourages entities to adopt a fair value based method of
accounting for stock based compensation plans in place of the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), for all arrangements under which employees receive shares
of stock or other equity instruments of the employer.
As allowed by FAS 123, the Company will continue to apply the provisions of
APB 25 in accounting for its stock-based employee compensation arrangements,
and will disclose the pro forma net loss and loss per share information in
its footnotes as if the fair value method suggested in FAS 123 had been
applied.
The Company recognizes compensation cost for stock-based compensation
arrangements equal to the difference between the quoted market price of the
stock option at the date of grant and the price to be paid by the employee
upon exercise in accordance with the provisions of APB 25. Based upon the
terms of Company's current stock option plans, the stock price on the date of
grant and price paid upon exercise are the same, thus no compensation charge
is required to be recognized.
Had compensation cost for the Company's Stock Option Plans been determined
based on the fair value at grant date for awards in 1997 and 1996 consistent
with the provisions of FAS 123, the Company's net loss and loss per share
would have been increased to the pro forma amounts indicated below:
Dollar amounts in thousands
except per share data 1997 1996
-------- --------
Net loss, as reported $ (3,831) $ (9,892)
Net loss, pro forma $ (4,872) $ (9,951)
Loss per common share, as reported $ ( .48) $ ( 1.24)
Loss per common share, pro forma $ ( .61) $ ( 1.24)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997: dividend yield of 1.65%; expected
volatility of 52%; risk-free interest rate of 6.12%; and expected life of 4.2
years.
The weighted average fair value of options granted in 1997 is $3.15 per
share. The weighted average exercise price of the options outstanding is
$10.34 and the weighted average remaining contractual life of those options
is 3.6 years.
-25-
<PAGE>
7. SHAREHOLDER RIGHTS PLAN
The Company has a Shareholder Rights Plan (the Plan) which was established to
deter coercive takeover tactics and to prevent an acquiror from gaining control
of the Company without offering a fair price to all of the Company's
stockholders. The Plan calls for stockholders of record on July 25, 1988 to
receive a dividend distribution of one right for each outstanding share of the
Company's common stock. Each share issued after that date is also granted a
right. Each right entitles the holder, upon the occurrence of certain events,
to purchase a unit consisting of one one-thousandth of a share of Series A
Junior Participating Preferred Stock, no par value, for $25 per unit. In
addition, if an acquiring person becomes the beneficial owner of more than 20
percent of the Company's outstanding common stock, each right will entitle the
holder (other than such acquiring person) to receive, upon exercise, common
stock of the Company having a value equal to two times the exercise price of the
right or $50.
If an acquiring person becomes the beneficial holder of more than 20 percent of
the Company's outstanding common stock, and then the Company is acquired in a
merger or other business combination in which the Company would not be the
surviving corporation or 50% or more of the Company's assets or earning power is
sold, each holder shall have the right to receive, upon exercise, common stock
of the acquiring corporation having a value equal to two times the exercise
price of the right or $50. The Company may redeem the rights, for $.01 per
right, under certain circumstances.
8. STOCK RETIREMENT PLAN
The Company's Long-Term Stock Ownership Incentive Plan contains a provision for
a retirement stock award program for certain key executives of the Company. The
award consists of shares of the Company's common stock and cash ending with the
fiscal year in which the executive attains his or her 62nd birthday. In order
to receive each year's stock award, the executive must remain employed with the
Company through the end of the fiscal year, unless excused by reason of death or
other involuntary termination. Participants are also required to retain the
shares awarded for as long as they are employed by the Company or until age 65.
The size of each participant's annual award is determined under accepted
actuarial principles to provide a retirement income based upon a percentage of
the executive's projected compensation and length of service at retirement, but
only if the Company's stock price appreciates at a sustained target rate. The
Plan resulted in a charge to earnings of $561,000 (1997), $463,000 (1996) and
$766,000 (1995).
9. INCOME TAXES
The income tax provisions (benefits) from continuing operations are comprised of
the following for the three years ended June 30:
Dollar amounts in thousands 1997 1996 1995
------- ------- -------
Current:
Federal $ 496 $ 2,660 $ 1,750
State 665 850 294
-------- -------- -------
1,161 3,510 2.044
-------- -------- -------
Deferred:
Federal (26) (536) (175)
State (378) (156) (51)
-------- -------- --------
$ (404) $ (692) $ (226)
-------- -------- --------
Income tax provision for continuing operations $ 757 $ 2,818 $ 1,818
-------- -------- --------
Income tax (benefit) provision from
discontinued operations (3,961) (9,888) 1,407
-------- -------- --------
Total income tax (benefit) provision $ (3,204) $(7,070) $ 3,225
======== ======== ========
-26-
<PAGE>
The components of the net deferred tax asset (liability) are as follows at June
30:
Dollar amounts in thousands 1997 1996
-------- --------
Deferred tax assets:
Accounts receivable allowance $ 66 $ 66
Inventory valuation 170 160
Compensated absences and medical claims 130 374
Tax over book basis in affiliates 1,612 1,509
Capital loss carryforwards 967
Other liabilities and reserves 879 641
Net operating loss carryforwards 2,527 2,951
Various tax credit carryforwards 12 30
Contribution carryforwards 9 9
Provision for discontinued operations 4,064 2,589
Valuation allowance (3,480) (4,356)
-------- --------
Total $ 5,989 $ 4,940
======== ========
Deferred tax liabilities:
Book over tax basis of capital assets $ 1,595 $ 1,484
-------- --------
Net deferred tax asset $ 4,394 $ 3,456
======== ========
The valuation allowance relates principally to deferred tax assets that the
Company estimates may not be realizable, including portions of tax over book
basis in affiliates, net operating loss carryforwards, and tax credit
carryforwards. The decrease in the valuation allowance is due principally to
the expiration of unutilized net operating loss carryforwards and the
utilization of capital loss carryforwards which previously were not expected
to be realized. The decrease was partially offset by an increase in the
valuation allowance due to a reassessment of the realizability of certain net
operating loss carryforwards as a result of the discontinued operations of
the subsidiary which generated the net operating losses.
At June 30, 1997, certain subsidiaries of the Company have approximately
$5,716,000 of federal and $337,500 of state net operating loss carryforwards
for tax purposes substantially all of which arose in periods prior to
acquisition by the Company. Certain limitations on utilization are present
and realization of a significant portion of the carryforwards is uncertain.
These carryforwards expire in years from 1998 through 2005.
The net deferred tax asset (liability) is presented on the balance sheet as
follows at June 30:
Dollar amounts in thousands 1997 1996
-------- --------
Current deferred tax asset $ 887
Noncurrent deferred tax liability (566) $ (83)
-------- --------
Net deferred tax asset (liability) of continuing
operations 321 (83)
-------- --------
Current deferred tax asset of discontinued
operations 2,458
Noncurrent deferred tax asset of discontinued
operations 1,615 3,539
-------- --------
Net deferred tax asset of discontinued operations 4,073 3,539
-------- --------
Net deferred tax asset $ 4,394 $ 3,456
======== ========
-27-
<PAGE>
Income tax provisions differed from the taxes calculated at the statutory
federal tax rate as follows for the three years ended June 30:
Dollar amounts in thousands 1997 1996 1995
-------- -------- --------
Taxes at statutory rate $ 1,246 $ 2,451 $ 2,095
State income taxes 189 458 160
Utilization of capital loss
carryforwards (822) (561)
Other 144 470 (437)
-------- -------- --------
Income tax provision for
continuing operations: $ 757 $ 2,818 $ 1,818
======== ======== ========
10. EARNINGS PER SHARE
Primary earnings per share are computed by dividing the net earnings for each
period by the weighted average number of common and common equivalent shares
outstanding.
For 1996 and 1995 fully diluted earnings per share is computed based on the
assumption that all of the convertible debentures are converted into common
shares. Under this assumption, the weighted average number of shares is
increased accordingly and net earnings is increased by the amount of interest
expense and amortization of deferred debenture costs relating to the
convertible debentures, less income tax benefits.
11. COMMITMENTS AND CONTINGENT LIABILITIES
Aggregate rental expense under operating leases, principally for office and
manufacturing facilities used in continuing operations was $450,000 in 1997,
$504,000 in 1996 and $469,000 in 1995. These operating leases include
options for renewal. Annual minimum future rentals for lease commitments
related to continuing operations range from approximately $480,000 in 1998 to
$300,000 in 2002, an aggregate of $1,842,000 through 2002.
The Company has employment agreements with certain executives, which are
designed to retain the services of key employees and to provide for
continuity of management in the event of an actual or threatened change in
control of the Company. Upon occurrence of a triggering event after a change
in control, as defined, the Company would be liable for payment of benefits
under these agreements.
In 1990, Disc Manufacturing, Inc. (DMI), a discontinued operation, and the
Company filed lawsuits in the federal and state courts in Alabama against the
Disctronics Group, the former owners of DMI, relating to DMI's
misappropriated corporate opportunity to acquire Memory Tech, a competing
compact disc manufacturer located in Plano, Texas, and certain trademark
infringement claims. In response to the two Alabama suits, the Disctronics
Group filed counterclaims alleging breach of contract, economic duress,
fraud, unfair competition and seizure of corporate opportunity, among others.
In 1990, the Alabama state court issued a preliminary injunction in favor
of the Company and DMI, precluding the Disctronics Group from transferring
any interest in Memory Tech and other restrictions. In connection with this
injunction, the Company and DMI were required to post a $6,000,000
certificate of deposit as injunction security. The state court subsequently
approved DMI's substitution of a $6,000,000 surety bond backed by a
$2,000,000 letter of credit to replace the certificate of deposit.
In May 1992, the Alabama Supreme Court reversed the judge's 1990 order
granting preliminary injunction. In April 1993, the Company amended its
complaint to add claims for unjust enrichment, fraud and tortious
interference, which the defendants moved to dismiss.
In a May 1995 order, the court dismissed many of the defendants' and the
Company's claims and the parties appealed. In September 1996, the Alabama
Supreme Court issued its opinion, reinstating all of DMI's claims which had
been dismissed except the corporate opportunity to acquire Memory-Tech, Inc.
and unjust enrichment claims. The Supreme Court also upheld the dismissal of
all of the claims of the Disctronics Group except a claim
-28-
<PAGE>
related to the use of the name "Disctronics". Petitions for rehearing were
denied and the decision is now final. The Disctronics Group has filed an
amended counterclaim, certain claims of which DMI has moved to dismiss.
Court-appointed mediation has not been successful.
Several companies holding patents related to optical disc technology have
contacted the Company to request that DMI enter into licensing arrangements
with them, and two companies have filed suits against DMI for patent
infringement in Delaware federal court. In one of the cases, a federal jury
ruled that the plaintiff's patents were invalid and the plaintiffs have
appealed. In the other case, DMI filed a lawsuit against the plaintiff for
antitrust violations and DMI's lawsuit has been consolidated with the
plaintiff's patent case for all purposes. Trial is scheduled to begin in
October 1997. Royalties requested by the patent holders could result in a
significant cost to the Company.
In September 1990, DMI was sued by a customer that claimed DMI failed to
produce certain video discs on schedule, thereby injuring its business.
After a trial, on August 25, 1992, the jury awarded the plaintiff $975,000 in
damages. In October 1992, the court granted DMI's motion for a new trial
which was subsequently affirmed by the appellate court. Trial is scheduled
to begin in February 1998.
Stenograph Corporation, a discontinued operation, and a number of
manufacturers of keyboards and related equipment have been sued by
individuals for repetitive stress injuries. The 30 cases against Stenograph,
and in some cases the Company, request damages ranging from $500,000 to
$1,000,000, and in most cases, punitive damages, with some plaintiffs
claiming an amount of $10,000,000. Of the 30 cases, six were dismissed in
April 1997 after a jury verdict in favor of Stenograph and an appeal is
pending. In addition, six cases have been dismissed with prejudice and ten
cases have been dismissed without prejudice to refile the complaints. All
cases have been referred to the Company's insurance carriers and the Company
believes that any liability (excluding punitive damages and deductibles in
certain years) will be covered under its insurance policies. The Company
does not believe there are grounds for the imposition of punitive damages and
intends to vigorously defend all claims.
The Company is involved in these and other legal actions common to its
businesses. The Company has recorded loss contingencies where appropriate
within the guidelines established by Statement of Financial Accounting
Standards No. 5 Accounting for Contingencies. The Company believes it has
defenses for all such claims and is vigorously defending the actions. In the
opinion of management, based on the advice of legal counsel, liabilities, if
any, arising from these legal actions should not have a material effect on
the Company's results of operations or financial condition.
12. SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES
Cash paid for interest was $3,825,000 (1997), $6,105,000 (1996) and
$4,015,000 (1995). The Company received a refund from income taxes of
$3,954,000 in 1997. Cash paid for income taxes was $1,495,000 (1996) and
$4,116,000 (1995).
13. INDUSTRY SEGMENT INFORMATION
The Company's operations consist of one industry segment: the manufacture
and sale of highway safety products. Substantially all the sales of highway
safety devices are to contractors, or to federal, state and local
governmental units, either direct or through distributors.
-29-
<PAGE>
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for years 1997 and 1996 follows:
<TABLE>
<CAPTION>
Three months Ended 1997,
Dollar amounts in thousands, except per share data 9/30 12/31 3/31 6/30
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 11,096 $ 9,195 $ 10,268 $ 14,478
Gross profit 5,594 4,311 4,797 7,547
Earnings (loss) from continuing operations 691 (301) 189 2,328
Earnings (loss) from discontinued operations 105 1,340 (8,183)
--------- --------- --------- ---------
Net earnings (loss) $ 796 $ 1,039 $ (7,994) $ 2,328
--------- --------- --------- ---------
Primary earnings (loss) per share:
Continuing operations $ .09 $ (.04) $ .02 $ .29
--------- --------- --------- ---------
Net earnings (loss) $ .10 $ .13 $ (1.00) $ .29
--------- --------- --------- ---------
Fully diluted earnings (loss) per share:
Continuing operations $ .08 $ (.04) $ .02 $ .29
--------- --------- --------- ---------
Net earnings (loss) $ .10 $ .13 $ (1.00) $ .29
--------- --------- --------- ---------
Three months Ended 1996,
Dollar amounts in thousands, except per share data 9/30 12/31 3/31 6/30
---------- ---------- ---------- ---------
1996
Net sales $ 12,214 $ 10,074 $ 10,953 $ 13,509
Gross profit 6,376 4,740 5,777 7,398
Earnings from continuing operations 1,080 228 538 2,544
Earnings (loss) from discontinued operations (11,642) 89 (2,339) (390)
--------- --------- --------- ---------
Net earnings (loss) $ (10,562) $ 317 $ (1,801) $ 2,154
---------- --------- --------- ---------
Primary earnings (loss) per share:
Continuing operations $ .13 $ .03 $ .07 $ .32
--------- --------- --------- ---------
Net earnings (loss) $ (1.32) $ .04 $ (.23) $ .27
--------- --------- --------- ---------
Fully diluted earnings (loss) per share:
Continuing operations $ .13 $ .03 $ .07 $ .29
--------- --------- --------- ---------
Net earnings (loss) $ (1.32) $ .04 $ (.23) $ .26
--------- --------- --------- ---------
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial
- ---------------------------------------------------------------------------
Disclosures
- -----------
None.
-30-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Some of the information required in response to this item regarding Directors
of the Registrant is set forth under "Election of Directors" on pages 2 and 3
of the Registrant's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on November 19, 1997 to be filed with the Commission
on or about September 29, 1997 and is incorporated herein by reference.
The executive officers of the Company, their ages and offices held by each
during fiscal 1997 are as follows:
Philip E. Rollhaus, Jr. 62 Chairman, Chief Executive Officer &
Director - Quixote Corporation
Chairman, Energy Absorption Systems, Inc.
Leslie J. Jezuit 51 President, Chief Operating Officer &
Director - Quixote Corporation,
Vice Chairman - Energy Absorption
Systems, Inc.
Daniel P. Gorey 46 Vice President, Chief Financial Officer &
Treasurer - Quixote Corporation
Joan R. Riley 44 General Counsel & Secretary - Quixote
Corporation
George D. Ebersole 61 President, Energy Absorption Systems, Inc.
Mr. Rollhaus has been the Chairman and Chief Executive Officer and a Director of
the Company since its formation in July 1969.
Mr. Jezuit joined the Company as President and Chief Operating Officer of
Quixote Corporation in 1996. Prior to that time, Mr. Jezuit served as President
and Chief Operating Officer of RobertShaw Controls Company.
Mr. Gorey joined the Company as Manager of Corporate Accounting in July 1985.
He was made Controller of the Company in 1987, elected Vice President in
1994, and was elected Chief Financial Officer and Treasurer
in November 1996.
Ms. Riley joined the Company as Assistant General Counsel and Assistant
Secretary in 1991 and was elected General Counsel and Secretary in 1997.
Mr. Ebersole joined the Company as President of Energy Absorption Systems, Inc.
in 1980.
There is no family relationship between any of the officers described above.
Except as set forth in Item 3, none of the officers described above are party or
otherwise involved in any legal proceedings adverse to the Company or its
subsidiaries.
Item 11. Executive Compensation
- --------------------------------
The information required in response to this item is set forth under the caption
"Remuneration of Directors and Executive Officers" of the Registrant's
Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
November 19, 1997 to be filed with the Commission on or about September 29, 1997
and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The information required in response to this item is set forth under the caption
"Stock Ownership by Certain Beneficial Owners" of the Registrant's Definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on November
19, 1997 to be filed with the Commission on or about September 29, 1997 and is
incorporated herein by reference.
-31-
<PAGE>
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required in response to this item is set forth under the caption
"Certain Transactions and Business Relationships" of the Registrant's Definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on November
19, 1997 to be filed with the Commission on or about September 29, 1997 and is
incorporated herein by reference.
-32-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
----------------------------------------------------------------
Item Page Number in
Number This Report
- ------ --------------
(a).1. Financial Statements
--------------------
Report of Independent Accountants 16
Consolidated Statements of Operations for the
years ended June 30, 1997, 1996 and 1995 17
Consolidated Balance Sheets as of June 30,
1997 and 1996 18
Consolidated Statements of Shareholders'
Equity for the years ended June 30, 1997,
1996 and 1995 19
Consolidated Statements of Cash Flows for the
years ended June 30, 1997, 1996 and 1995 20
Notes to Consolidated Financial Statements 21-30
(a).2. Financial Statement Schedule
-----------------------------
The financial statement schedule listed under Item 14(d) is filed as part of
this annual report. All other schedules have been omitted because the required
information is included in the consolidated financial statements or notes
thereto or because they are not applicable or not required.
(a).3. The exhibits listed under Item 14(c) are filed as part of
this annual report.
(b). Reports on Form 8-K
-------------------
On April 10, 1997, the Company filed a report on Form 8-K dated March 27, 1997,
reporting under "Item 2 Acquisition or Disposition of Assets", that the Company
had completed the sale of substantially all of the assets of Disc Manufacturing,
Inc. to Cinram Inc. and Cinram Ltd. The Company received $80.3 million in cash
from the sale which was used to repay all of its $37.2 million of bank debt, to
redeem all of its 8% Convertible Subordinated Debentures and the related accrued
interest and to pay transaction costs. The Company reported that the balance
would be used to invest in the highway safety and equipment business or in other
opportunities deemed beneficial to stockholders, including repurchase of a
portion of the Company's outstanding common stock. Included in the Form 8-K
filing was the pro forma financial information required pursuant to Article 11
of regulation S-X in connection with the sale.
The report on Form 8-K also reported under "Item 5 Other Events", the Company's
exercise of its optional redemption rights to redeem on April 30, 1997 all of
its 8% Convertible Subordinated Debentures. Also reported was the amendment of
the Company's banking arrangements, including the reduction of its borrowing
availability from $65 million to $40 million.
-33-
<PAGE>
(c). Exhibits
--------
*Management contract or compensatory plan or agreement
3.(a) Restated Certificate of Incorporation dated June 27, 1980;
Certificate of Amendment to Certificate of Incorporation dated
November 17, 1981; Certificate of Amendment to Certificate of
Incorporation dated February 15, 1985; Certificate of Amendment
to Certificate of Incorporation dated February 25, 1986; and
Certificate of Designations, Preferences and Rights of Series A
Junior Participating Preferred Stock dated July 27, 1988, filed
as Exhibit 3(a) to the Company's Form 10-K Report for the fiscal
year ended June 30, 1991, File No. 0-7903, and incorporated herein
by reference.
(b) Restated By-Laws of the Company as amended through January 23, 1996,
filed as Exhibit 3(b) to the Company's Form 10-Q Report for the
quarter ended March 31, 1996, File No. 0-7903, and incorporated
herein by reference.
4. (a) Rights Agreement dated as of July 15, 1988, between the
Company and First National Bank of Boston, as Rights Agent, filed as
Exhibit 1 to the Company's Form 8-A Registration Statement dated
July 25, 1988, File No. 0-7903, and incorporated herein by
reference.
10.(a) Loan Agreement ("Loan Agreement") dated as of June 26, 1992 among
the Company, Energy Absorption Systems, Inc. ("Energy"), Disc
Manufacturing, Inc. ("DMI"), Stenograph Corporation ("Stenograph"),
The Northern Trust Company ("Northern"), NBD Bank, N.A. ("NBD")
and LaSalle National Bank ("LaSalle") and First Amendment thereto
dated as of June 30, 1992, filed as Exhibit 10(a) to the Company's
Form 10-K Report for the fiscal year ended June 30, 1992, file
No. 0-7903, and incorporated herein by reference; Second Amendment
to Loan Agreement dated as of May 28, 1993 and Third Amendment to
Loan Agreement dated as of June 26, 1993, filed as Exhibit 10(a) to
the Company's Form 10-K Report for the fiscal year ended June 30,
1993, File No. 0-7903, and incorporated herein by reference; Fourth
Amendment to Loan Agreement dated as of May 31, 1994, filed as
Exhibit 10(a), to the Company's Form 10-K Report for the fiscal year
ended June 30, 1994, File No. 0-7903, and incorporated herein by
reference; Fifth Amendment to Loan Agreement dated as of December 1,
1994, filed as Exhibit 10(a) to the Company's Form 10-Q for the
quarter ended December 31, 1994, File No. 0-7903, and incorporated
herein by reference; Sixth Amendment to Loan Agreement dated as of
April 3, 1995, filed as Exhibit 10(a) to the Company's Form 10-Q
Report for the quarter ended March 31, 1995, File No. 0-7903, and
incorporated herein by reference; Seventh Amendment to Loan
Agreement dated as of November 10, 1995, filed as Exhibit 10(a) to
the Company's Form 10-Q Report for the quarter ended December 31,
1995, File No. 0-7903, and incorporated herein by reference;
Eighth Amendment to Loan Agreement effective as of March 31, 1996,
filed as Exhibit 10(a) to the Company's Form 10-K Report for the
fiscal year ended June 30, 1996, File No.0-7903, and incorporated
herein by reference; Ninth Amendment to Loan Agreement dated
March 24, 1997, filed as Exhibit 2.2 to the Company's Form 8-K
Report dated March 27, 1997, File No. 0-7903, and incorporated
herein by reference; Revolving Credit Notes dated as of March 31,
1996 from the Company and its subsidiaries to the Northern, NBD and
LaSalle, filed as Exhibit 10(a) to the Company's Form 10-K Report
for the fiscal year ended June 30, 1996, File No. 0-7903, and
incorporated herein by reference.
(b)* Restated 1972 Director Stock Option Plan, as amended through
June 3, 1988, filed as Exhibit 4.3 to the Company's S-8 Registration
Statement No. 33-22289, and incorporated herein by reference;
Amendment dated February 12, 1989 to the Restated Director Stock
Option Plan, filed as Exhibit 10(d) to the Company's Form 10-K
Report for the fiscal year ended June 30, 1989, File No. 0-7903, and
incorporated herein by reference.
(c)* 1991 Director Stock Option Plan, as amended through August 28, 1997,
filed herewith.
-34-
<PAGE>
(d)* 1993 Long-Term Stock Ownership Incentive Plan, as amended
through August 28, 1997, filed herewith; Retirement Award
Agreements for Philip E. Rollhaus, Jr., James H. DeVries, Myron
R. Shain and George D. Ebersole, dated June 30, 1993 and as
amended on August 23, 1996, filed as Exhibit 12(f) to the
Company's Form 10-K Report for the fiscal year ended June 30,
1996, File No. 0-7903 and incorporated herein by reference;
Retirement Award Agreement dated as of June 30, 1997 between the
Company and Daniel P. Gorey, filed herewith.
(e) Lease Agreement between the Company and United Insurance
Company of America ("Company Lease") dated July 2, 1993, filed as
Exhibit 10(j) to the Company's Form 10-K Report for the fiscal year
ended June 30, 1993, File No. 0-7903, and incorporated herein by
reference; Lease Amendment to Company Lease dated as of May 17,
1994, filed as Exhibit 10(h) to the Company's Form 10-K Report for
the fiscal year ended June 30, 1994, File No. 0-7903, and
incorporated herein by reference; Second Amendment to Company Lease
dated January 30, 1995 and Third Amendment to Company Lease dated
December 15, 1995, filed as Exhibits 10(b) and 10(c) to the
Company's Form 10-Q Report for the quarter ended December 31, 1995,
File No. 0-7903, and incorporated herein by reference; Fourth
Amendment to Company Lease dated as of September 18, 1996 filed as
Exhibit 10(b) to the Company's Form 10-Q Report for the quarter
ended December 31, 1996 and incorporated herein by reference;
Office Lease between Amberjack, Ltd. and Litigation Sciences, Inc.
dated July 2, 1990, filed as Exhibit 10(a) to the Company's
Form 10-Q Report for the quarter ended December 31, 1993,
File No. 0-7903 and incorporated herein by reference; First
Amendment to Office Lease between Amberjack Ltd. and
Stenograph Corporation dated as of June 23, 1994, filed as
Exhibit 10(h) to the Company's Form 10-K Report for the fiscal year
ended June 30, 1994, File No. 0-7903, and incorporated herein by
reference; Promissory Note dated December 31, 1996 from Quixote
Steno Corporation and Quixote Corporation to Coventry Fund III,
Ltd., filed herewith.
(f)* Employment agreement ("Employment Agreement") dated as of June 24,
1991 between the Company and Philip E. Rollhaus, Jr., filed as
Exhibit 10(k) to the Company's Form 10-K Report for the fiscal year
ended June 30, 1991, File No. 0-7903, and incorporated herein by
reference; Amended Executive Employment Agreement dated November 14,
1996 to Employment Agreement and Second Amendment to Employment
Agreement dated January 12, 1997, filed as Exhibit 10(a) to the
Company's form 10-Q Report for the quarter ended December 31, 1996,
File No. 0-7903, and incorporated herein by reference; Key Employee
Severance Agreement between the Company and George D. Ebersole and
Trust Agreement dated March 3, 1989 between the Company and The
Northern Trust Company, as trustee, filed as Exhibits 28.4 and 28.5,
respectively, to the Company's Form 8-K Report dated April 14, 1989,
and incorporated herein by reference; Amendment to Key Employee
Severance Agreement dated January 12, 1997 between the Company and
George D. Ebersole, filed as Exhibit 10 (a) to the Company's
Form 10-Q Report for the quarter ended December 31, 1996,
File No. 0-7903, and incorporated herein by reference; Amendment to
Trust Agreement dated November 9, 1989, filed as Exhibit 10(j) to
the Company's Form 10-K Report for the fiscal year ended June 30,
1990, File No. 0-7903, and incorporated herein by reference;
Amendment to Trust Agreement dated as of June 13, 1991, filed as
Exhibit 10(k) to the Company's Form 10-K Report for the
fiscal year ended June 30, 1991, File No. 0-7903, and incorporated
herein by reference; Letter Agreement dated December 15, 1995
between the Company and Leslie J. Jezuit, filed as Exhibit 10(d) to
the Company's Form 10-Q Report for the quarter ended December 31,
1995, File No. 0-7903, and incorporated herein by reference; Key
Employee Severance Agreement dated as of April 30, 1996 between the
Company and Leslie J. Jezuit, filed as Exhibit 10(a) to the
Company's Form 10-Q Report for the quarter ended March 31, 1996,
File No. 0-7903, and incorporated herein by reference; Amendment to
Key Severance Agreement dated January 12, 1997 between the Company
and Leslie J. Jezuit, filed as Exhibit 10 (a) to the Company's
Form 10-Q Report for the quarter ended December 31, 1996,
-35-
<PAGE>
File No. 0-7903, and incorporated herein by reference; Key Employee
Severance Agreement dated February 17, 1989 and Amendment to Key
Employee Severance Agreement dated January 10, 1997 between the
Company and Daniel P. Gorey, filed as Exhibit 10 (a) to the
Company's Form 10-Q Report for the quarter ended December 31,
1996, File No. 0-7903, and incorporated herein by reference; Letter
Agreement dated January 13, 1997 between the Company and Myron R.
Shain, filed as Exhibit 10 (a) to the Company's Form 10-Q Report for
the quarter ended March 31, 1997; File No. 0-7903, and incorporated
herein by reference; Letter Agreement dated August 12, 1997 between
the Company and James H. DeVries, filed herewith.
(g) Summary Plan Description for the Incentive Savings Plan of
the Company Amended and Restated to Reflect Provisions Effective
July 1, 1993, filed as Exhibit 10(j) to the Company's Form 10-K
Report for the fiscal year ended June 30, 1994, File No. 0-7903,
and incorporated herein by reference.
(h) Agreements between the Company, Philip E. Rollhaus, Jr. and Yukio
Endo dated May 5, 1986, filed as Exhibit 10(a) to the Company's
Form 10-Q Report for the quarter ended March 31, 1986,
File No. 0-7903, and incorporated herein by reference.
(i) Agreement for Purchase and Sale dated February 13, 1996 between
Stenograph Acquisition Corp., IIS Acquisition Corp., Pettibone
Corp., and Quixote Corporation, Stenograph Corporation,
Legal Technologies, Inc., Legal Technologies Limited and
Integrated Information Services filed as Exhibit 2.1 to the
Company's 8-K Report dated March 4, 1996, File No. 0-7903, and
incorporated herein by reference.
(j) Agreement for Purchase and Sale dated January 25, 1996 between
Stenograph Corporation and LSI Acquisition, Inc. filed as
Exhibit 2.2 to the Company's 8-K Report dated March 4, 1996,
File No. 0-7903, and incorporated herein by reference.
(k) Agreement for Purchase and Sale of Assets dated July 3, 1996 between
Integrated Information Services, Inc., Pettibone Corporation,
Quixote Corporation and Discovery Products, Inc., filed as
Exhibit 10(k) to the Company's Form 10-K for the year ended
June 30, 1996, File No. 0-0793, and incorporated herein by
reference.
(l) Asset Purchase Agreement dated as of December 8, 1996 among the
Company, Disc Manufacturing, Inc., Cinram Ltd. and Cinram Inc.,
filed as Exhibit 10 (c) to the Company's Form 10-Q for the quarter
ended December 31, 1996, File No. 0-7903, and incorporated herein
by reference.
11. Statement regarding computation of earnings per share
21. Subsidiaries of the Company
23. Consent of Coopers & Lybrand, L.L.P. as Independent
Certified Public Accountants
27. Financial Data Schedule
(d) Schedules:
---------
II - Valuation and Qualifying Accounts and Reserves
-36-
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunder duly authorized
QUIXOTE CORPORATION
(Registrant)
Dated: September 26, 1997 By: /s/ Philip E. Rollhaus, Jr.
-------------------------- --------------------------------
Philip E. Rollhaus, Jr.,
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Philip E. Rollhaus, Jr.
- --------------------------- Chairman and Director September 26, 1997
Philip E. Rollhaus, Jr. (Chief Executive Officer)
/s/ Leslie J. Jezuit
- --------------------------- President and Chief Operating September 26, 1997
Leslie J. Jezuit Officer
/s/ Daniel P. Gorey
- --------------------------- Vice President, Chief Financial September 26, 1997
Daniel P. Gorey Officer and Treasurer (Chief
Accounting and Financial Officer)
/s/ James H. DeVries
- --------------------------- Director September 26, 1997
James H. DeVries
/s/ William G. Fowler
- --------------------------- Director September 26, 1997
William G. Fowler
/s/ Lawrence C. McQuade
- --------------------------- Director September 26, 1997
Lawrence C. McQuade
/s/ Robert D. van Roijen, Jr.
- --------------------------- Director September 26, 1997
Robert D. van Roijen, Jr.
-37-
<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D(a) Column E
- -------- -------- ----------- ----------- ---------
Additions
Balance at Charged to Balance at
Beginning of Costs and End of
Description Period Expenses Deductions Period
- ----------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Deducted from
Receivables:
Allowance for
Doubtful Accounts:
Year ended
June 30, 1997 $ 165,000 $ 2,000 $ 2,000 $ 165,000
========== ========== ========== ==========
Year ended
June 30, 1996 $ 160,000 $ 21,000 $ 16,000 $ 165,000
========== ========== ========== ==========
Year ended
June 30, 1995 $ 160,000 $ 2,000 $ 2,000 $ 160,000
========== ========== ========== ==========
</TABLE>
NOTES:
(a) Column D represents accounts written off as uncollectable, net of
collections on accounts previously written off.
-38-
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBITS
- ---------------------- -----------------------------------------------
10(c) 1991 DIRECTOR STOCK OPTION PLAN
AMENDED AUGUST 28, 1997
10(d) 1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN
AMENDED AUGUST 28, 1997
10(d) RETIREMENT AWARD AGREEMENT DATED AS OF JUNE 30,
1997 BETWEEN QUIOXTE CORPORATION AND DANIEL P. GOREY
10(e) PROMISSORY NOTE DATED DECEMBER 31, 1996 TO COVENTRY
FUND III, LTD.
10(f) LETTER AGREEMENT DATED AUGUST 12, 1997 BETWEEN
QUIXOTE CORPORATION AND JAMES H. DEVRIES
11 STATEMENT REGARDING COMPUTATION OF EARNINGS
PER SHARE.
21 SUBSIDIARIES OF THE COMPANY.
23 CONSENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.
27 FINANCIAL DATA SCHEDULE
-39-
<PAGE>
Exhibit 10(c)
QUIXOTE CORPORATION
1991 DIRECTOR STOCK OPTION PLAN
Amended August 28, 1997
1. PURPOSE
This Stock Option Plan (the "Plan") is intended as an incentive to
encourage stock ownership by certain Directors of QUIXOTE CORPORATION (the
"Corporation") so that they may acquire or increase their proprietary
interest in the success of the Corporation and to encourage them to continue
to render their services to the Corporation as Directors. It is further
intended that options granted pursuant to this Plan may constitute "incentive
stock options" within the meaning of Section 422A of the Internal Revenue
Code, as amended (the "Code"), if they satisfy the various requirements
specified under Code Sec. 422A. Otherwise, options granted pursuant to this
Plan shall be "nonqualified stock options".
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). The Committee shall consist
of all members of the Corporation's Board of Directors unless the Board
adopts a resolution naming other individuals to serve on the Committee. The
Board of Directors may from time to time remove members from, or add members
to, the Committee. Vacancies on the Committee, howsoever caused, shall be
filled by the Board of Directors. The Committee shall select one of its
members as Chairman and shall hold meetings at such times and places as it
may determine. A majority of the Committee at which a quorum is present, or
acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee. The Committee shall from
time to time at its discretion recommend to the Board of Directors with
respect to the Directors who shall be granted options and the amount of stock
to be optioned to each.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted under it.
3. ELIGIBILITY
The persons who shall be eligible to receive options shall be Directors
of the Corporation as the Board of Directors shall select from time to time
from among those nominated by the Committee, provided however, that only
Directors who are also employees of the Corporation shall be eligible to
receive "incentive stock options" under this Plan. An optionee may hold more
than one option, but only on the terms and subject to the restrictions
hereafter set forth. No person shall be eligible to receive an option for a
larger number of shares of stock than is recommended for him by the
Committee, and in no event shall any optionee in any calendar year receive
options under this Plan for stock with an aggregate fair market value
(determined at the time of the grant of the option) in excess of the
limitations set forth in Section 5(b) of the Plan. The number of shares of
stock with respect to which
<PAGE>
option rights under the Plan may be granted to any individual during the term
of the Plan shall not exceed 90,000 shares, subject to adjustment as provided
in Section 5(g) of the Plan.
4. STOCK
The stock subject to options under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired $.01-2/3 par value common
stock, hereafter sometimes called Common Stock. The aggregate number of
shares that may be issued under options shall not exceed 419,445 shares of
Common Stock. The limitations established by each of the preceding sentences
shall be subject to adjustment as provided in Section 5(g) of the Plan.
In the event that any outstanding option under the Plan for any reason
expires or is terminated, the shares of Common Stock allocable to the
unexercised portion of such option may again be subjected to an option under
the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
Stock options granted under the Plan shall be authorized by the Board of
Directors and shall be evidenced by agreements in such form as the Committee
shall from time to time recommend and the Board of Directors shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(a) OPTIONEE'S AGREEMENT
Each optionee shall agree to render to the Corporation his services
as a Director (1) for a period of one year from the date of the option, or
(2) until his death, whichever first occurs, but such agreement shall not
impose upon the Corporation any obligation to retain the optionee in any
capacity for any period; provided, however, the agreement shall permit an
optionee to exercise the option after a "change of control" (as defined at
Section 5(g)) notwithstanding the optionee's failure to have served as a
Director for one year from the date of grant.
(b) Number of Shares
Each option shall state the number of shares to which it pertains.
Options granted under this Plan may be considered "incentive stock options"
as defined in Code Sec. 422A to the extent that the aggregate fair market
value of stock (determined at the time the option is granted) with respect to
which any such option is exercisable for the first time in a calendar year is
not more than $100,000.
(c) Option Price
Each option shall state the option price, which shall be not less
than 100% of the current market price of the shares of Common Stock of the
Corporation on the date of the granting of the option; provided, that in the
event an optionee owns stock representing more than ten percent of the voting
power or value of the stock of the Corporation on the date of grant, the
option price of an option which is intended to qualify as an "incentive stock
2
<PAGE>
option" shall not be less than 110% of the current market price of the shares
on the date of grant. The current market price of the Common Stock at any
date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive business days before the date in question. The
closing price for each day shall be the last reported sale price determined
in the regular way or, in case no such reported sale takes place on such day,
the average of the last reported bid and asked prices determined in the
regular way, in either case on the principal national securities exchange on
which the Common Stock is admitted to trading or listed, or if not listed or
admitted to trading on any national securities exchange, the average of
highest reported bid and lowest reported asked prices as reported by NASDAQ
or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by
the Board of Directors. Subject to the foregoing, the Board of Directors and
the Committee shall have full authority and discretion in fixing the option
price and be fully protected in doing so.
(d) Medium and Time of Payment
The option price is to be paid in full in United States dollars upon
the exercise of the option and may be paid in cash or by check, or with the
approval of the Committee, by the optionee tendering to the Corporation shares
of common stock of the Corporation owned by him and having a fair market value
(determined at the time the Corporation receives written notice of the
optionee's election to exercise the option) equal to the aggregate exercise
price of the options being exercised. With the approval of the Board of
Directors, the optionee may borrow from the Corporation all or any portion of
the funds needed to pay the option price on such terms and conditions as the
Committee deems appropriate, provided that: (1) the interest rate for any such
loan by the Corporation shall not be less than the "applicable federal rate" (as
defined by Code Section 1274(d)(1)(A) in effect on the date of such loan or any
other rate as necessary to avoid the imputation of interest under the Code or
other applicable law, (2) proceeds of the loan are used solely to pay the
exercise price of an option granted pursuant to this Plan, and (3) the optionee
executes a promissory note and such other documents as the Committee deems
appropriate to evidence the optionee's indebtedness to the Corporation.
(e) Term and Exercise of Options
Subject to this Section 5(e) and Sections 5(f) and 5(g) of this
Plan, no option shall be exercised either in whole or in part prior to twelve
months from the date it is granted. Subject to the right of cumulation
provided in this Section 5(e), each option granted pursuant to the Plan shall
be exercisable to the extent provided for in the agreement between the
Corporation and each optionee as determined by the Committee in its
discretion. The Committee may provide, however, for the exercise of options
after the initial twelve month period, either as to an increased percentage
of shares per year or as to all remaining shares, if the optionee shall, with
the approval of the Corporation, retire as a Director of the Corporation. To
the extent not exercised, installments shall accumulate and be exercisable,
in whole or in part, in any subsequent period, prior to the expiration of the
term described in the next sentence of this Section 5(e). No option shall be
exercisable after the expiration of ten years from the date it is granted,
provided that in the event the optionee owned stock representing more than
ten
3
<PAGE>
percent (10%) of the voting power or value of the stock of the Corporation on
the date the option was granted, any option which is intended to qualify as
an "incentive stock option" must be exercised within five (5) years from the
date of grant. During the optionee's lifetime, the options granted under this
Plan may be exercised only by him.
(f) Death of Optionee and Transfer of Option
If the optionee shall die and shall not have fully exercised the
option, the entire unexercised portion of the option may be exercised within
one year from the date of the optionee's death by the executors or
administrators of the optionee or by any person or persons who shall have
acquired the option directly from the optionee by bequest or inheritance,
subject to the condition that no option shall be exercisable after the
expiration of ten years (five years for an option which is intended to
qualify as an "incentive stock option" to an optionee who owned more than ten
percent of the value or voting power of the stock of the Corporation on the
date of grant) from the date it is granted.
No option shall be assignable or transferable by the optionee
otherwise than by will or the laws of descent and distribution.
(g) Recapitalization
Subject to any required action by the stockholders, the number of
shares of Common Stock covered by each outstanding option, and the price per
share thereof in each such option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Corporation resulting from a subdivision or consolidation of shares or the
payment of a stock dividend (but only on the Common Stock) or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Corporation.
Subject to any required action by the stockholders, if the
Corporation shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to the
securities to which a holder of the number of shares of Common Stock subject
to the option would have been entitled. A dissolution or liquidation of the
Corporation, or a merger or consolidation in which the Corporation is not the
surviving corporation, or a change in control of the Corporation, as defined,
shall cause each optionee to have the right to exercise his option in whole
or in part, notwithstanding the provisions of Section 5(e) above: (i)
immediately prior to such dissolution or liquidation or merger or
consolidation in which the Corporation is not the surviving corporation, and
thereafter; or (ii) after such change of control.
"Change of control" of the Corporation shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred if (i)
any "person" (as such term is used in Section 13(d) and 14(d) of the Exchange
Act) is, or becomes, the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Corporation
4
<PAGE>
representing twenty percent (20%) or more of the combined voting power of the
Corporation's then outstanding securities; or, (2) during any period of two
consecutive years, individuals who at the beginning of such period constitute
all members of the Board of Directors of the Corporation who are not employed
by the Corporation (the "Outside Directors") shall cease for any reason to
constitute at least a majority of the Outside Directors unless the election
of each Outside Director, who was not an Outside Director at the beginning of
the period, was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who were Directors at the beginning of the
period; or, (3) there shall be consummated (A) any consolidation or merger of
the Corporation in which the Corporation is not the continuing or surviving
corporation or pursuant to which shares of the Corporation's Common Stock
would be converted into cash, securities or other property, other than a
merger of the Corporation in which the holders of the Corporation's Common
Stock immediately prior to the merger have the same proportionate ownership
of common stock of the surviving corporation immediately after the merger, or
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets
of the Corporation or, (4) the stockholders of the Corporation approve a plan
or proposal for the liquidation or dissolution of the Corporation.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final and binding and
conclusive; provided that each option granted pursuant to this Plan which
could qualify as an "incentive stock option" shall not be adjusted in a
manner that causes the option to fail to continue as an "incentive stock
option" within the meaning of Code Section 422A.
Except as hereinbefore expressly provided in this Section 5(g), the
optionee shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or
by reason of any change of control, dissolution, liquidation, merger, or
consolidation or spin-off of assets or stock of another corporation, and any
issue of the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any
way the right of power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell, or transfer
all or any part of its business or assets.
5
<PAGE>
(h) Rights as a Stockholder
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any shares covered by his option until the date
of the issuance of a stock certificate to him for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
provided in Section 5(g) hereof.
(i) Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the limitations of
the Plan, the Committee, with the approval of the Board of Directors, may
modify, extend or renew outstanding options granted under the Plan, or accept
the surrender of outstanding options (to the extent not theretofore
exercised) and authorize the granting of new options in substitution therefor
(to the extent not theretofore exercised). The Board of Directors shall not,
however, modify any outstanding options so as to specify a lower price or
accept the surrender of outstanding options and authorize the granting of new
options in substitution therefor specifying a lower price. Notwithstanding
the foregoing however no modification of an option shall, without the consent
of the optionee, alter or impair any rights or obligations under any option
theretofore granted under the Plan.
(j) Investment Purpose
Each option under the Plan shall be granted on the condition that
the stock purchased shall be held for investment purposes, and not with a
view to resale or distribution except that in the event the stock subject to
such option is registered under the Securities Act of 1933, as amended, or in
the event a resale of such stock without such registration would otherwise be
permissible, such condition shall be inoperative if in the opinion of counsel
for the Corporation such condition is not required under the Securities Act
of 1933 or any other applicable law, regulation, or rule of any governmental
agency.
(k) Other Provisions
The option agreements authorized under the Plan shall contain such
other provisions, including, without limitation, restrictions upon the
exercise of the option, as the Committee and the Board of Directors of the
Corporation shall deem advisable.
6. TERM OF PLAN
Options may be granted under the Plan from time to time within a period
of ten years from the date the Plan is adopted, or the date the Plan is
approved by the Stockholders, whichever is earlier.
6
<PAGE>
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall
be indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Corporation) or paid by them in satisfaction of a judgment
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee member is liable for
negligence or misconduct in the performance of his duties; provided that
within sixty (60) days after institution of any such action, suit or
proceeding a Committee member shall in writing offer the Corporation the
opportunity at its own expense, to handle and defend the same.
8. AMENDMENT OF THE PLAN
Upon recommendation of the Committee, the Board of Directors of the
Corporation may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever except that without
approval of the stockholders, no such revision or amendment shall change the
number of shares subject to the Plan, change the designation of the
individuals eligible to receive options, decrease the price at which options
may be granted, remove the administration of the Plan from the Committee, or
extend the period during which options may be granted.
The Board of Directors of the Corporation shall, from time to time,
revise, modify, or amend the Plan, in part or in total, without approval of
the stockholders, as may be necessary to satisfy the requirements of the Code
such that certain stock options which are granted under the Plan may qualify
as "incentive stock options" as defined in Code Section 422A and any
amendments or revisions thereof.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common Stock
pursuant to options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee to
exercise such option.
7
<PAGE>
Date Plan was adopted by Board of Directors: August 19, 1991
Date Plan was approved by Stockholders: November 19, 1991
Date Plan was amended by Board of Directors: June 25, 1997
Date Plan was amended by Board of Directors: August 28, 1997
Date amended Plan was approved by Stockholders: 1997
----------
8
<PAGE>
Exhibit 10(d)-1
QUIXOTE CORPORATION
1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN
As Amended August 28, 1997
THE PLAN. Quixote Corporation, a Delaware corporation (the "Company"),
hereby amends and restates the substantive provisions of the Quixote
Corporation 1991 Incentive Stock Option Plan (the "1991 Plan"), to establish
the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan as set
forth herein and as may from time to time be amended (the "Plan"), in order
to add provisions which will provide the Company with the ability to provide
its senior executives with stock-based retirement benefits linked to
increases in the value of the Company's Stock. The Plan is effective as of
June 30, 1993 subject to the approval by a majority of the stockholders at
the first annual meeting of stockholders held after the Effective Date.
Until such time as stockholder approval of the Plan is obtained, the 1991
Plan will continue to exist and operate independently of the Plan. Options
granted and outstanding under the 1991 Plan following stockholder approval of
the Plan shall be governed by the provisions of the Plan. Nothing in this
Plan is intended to, or shall be deemed to, modify, amend or alter any of the
rights and benefits of holders of options granted under the 1991 Plan or
provide any additional benefits to such holders.
1. PURPOSE
The purposes of the Plan are to encourage selected employees of the
Company and its Subsidiaries who are capable of having an impact on the
performance of the Company to acquire a long-term proprietary interest in the
growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity (thus enhancing the
value of the Company for the benefit of its stockholders), and to enhance the
ability of the Company and its Subsidiaries to attract and retain qualified
individuals upon whom the sustained progress, growth, and profitability of
the Company depend. It is further intended that options issued pursuant to
this Plan shall constitute "incentive stock options" within the meaning of
Sec. 422A of the Internal Revenue Code (such options are referred to herein
as "Incentive Stock Options"). In the event that stock options granted
pursuant to this Plan do not satisfy the requirements specified under
Internal Revenue Code Sec. 422A, such options shall be "nonqualified stock
options."
2. DEFINITIONS
As used in the Plan, terms defined immediately after their use shall have
the respective meanings provided by such definitions and the terms set forth
below shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Affiliate" is a person that directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with the Company.
(b) "Award" means options, Retirement Stock Awards or Retirement
Cash Awards granted under the Plan.
<PAGE>
(c) "Award Agreement" has the meaning specified in Section 4(b)(v).
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
References to a particular section of the Code shall include references to
successor provisions.
(f) "Committee" means the committee of the Board appointed pursuant
to Section 4.
(g) "Company" has the meaning set forth in the introductory
paragraph.
(h) "Current Market Price" of the Stock means at any date the
average of the daily closing prices for thirty (30) consecutive business days
commencing no more than forty-five (45) business days before the day in
question. The closing price for each day shall be the last reported sales
price determined in the regular way or, in case no such reported sales takes
place on such day, the average of the last reported bid and asked prices
determined in the regular way, in either case on the principal national
securities exchange on which the Stock is admitted to trading or listed, or
if not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as reported by NASDAQ or other
similar organization if NASDAQ is no longer reporting such information, or if
not so available, the fair market price as determined by the Board.
(i) "Disability" means, as relates to the exercise of an Incentive
Stock Option after termination of employment, a disability within the meaning
of Section 22(e)(3) of the Code, and for all other purposes, a mental or
physical condition which, in the opinion of the Committee, renders a Grantee
unable or incompetent to carry out the job responsibilities which such
Grantee held or the tasks to which such Grantee was assigned at the time the
disability was incurred, and which is expected to be permanent or for an
indefinite duration exceeding one year.
(j) "Effective Date" means June 30, 1993; provided that the Plan
and any Retirement Awards granted prior to the 1993 annual meeting of the
Company's stockholders are subject to approval of the Plan by the
stockholders at such annual meeting.
(k) "Grant Date" means the date on which the Committee grants the
Award or such later date as specified in advance by the Committee; provided
however, that references to the Grant Date of an option under this Plan
shall, with respect to options granted under the 1991 Plan prior to
stockholder approval of the Plan, refer to the date of grant of such option
under the 1991 Plan.
(l) "Grantee" means an individual who has been granted an Award.
(m) "Including" or "includes" means "including, without
limitation," or "includes, without limitation."
2
<PAGE>
(n) "1934 Act" means the Securities Exchange Act of 1934, as
amended. References to a particular section of, or rule under, the 1934 Act
shall include references to successor provisions.
(o) "Option Price" means the per share purchase price of Stock
subject to an option.
p) "Plan" has the meaning set forth in the introductory paragraph.
(q) "Retirement" means a termination of employment with the Company
and its Subsidiaries any time after attaining age 60.
(r) "SEC" means the Securities and Exchange Commission.
(s) "Section 16 Grantee" means a person subject to potential
liability under Section 16(b) of the 1934 Act with respect to transactions
involving equity securities of the Company.
(t) "Stock" means the common stock of the Company, $0.01-2/3 par
value.
(u) "Subsidiary" means (i) with respect to Incentive Stock Options,
a corporation as defined in Section 424(f) of the Code with the Company being
treated as the employer corporation for purposes of this definition, and (ii)
for all other purposes any entity in which the Company directly or through
intervening subsidiaries owns at least a majority interest of the total
combined voting power or value of all classes of stock or, in the case of an
unincorporated entity, at least a majority in the capital and profits.
(v) "10% Owner" means a person who owns stock (including stock
treated as owned under Section 424(d) of the Code) possessing more than 10%
of the total combined voting power of all classes of stock of the Company.
3. SCOPE OF THE PLAN
(a) An aggregate of One Million and Fifteen Thousand (1,015,000)
shares of Stock are hereby made available and reserved for delivery on
account of Awards and the exercise of Awards, with Six Hundred Sixty Five
Thousand (665,000) shares of Stock being made available and reserved for
delivery on account of options and Three Hundred Fifty Thousand (350,000)
shares of stock being made available and reserved for delivery on account of
Retirement Stock Awards. The limitations established by the preceding
sentences shall be subject to adjustment as provided in Section 18 of the
Plan.
Such shares may be treasury shares, newly issued shares, or shares
purchased on the open market (including private purchases) in accordance with
applicable securities laws, or any combination of the foregoing, as may be
determined from time to time by the Board or the Committee.
(b) To the extent an Award shall expire or terminate for any reason
without having been exercised in full (including a cancellation and re-grant of
an option), or shall be forfeited, without, in either case, the
3
<PAGE>
Grantee having enjoyed any of the benefits of Stock ownership (other than
voting rights or dividends that are also forfeited), the shares of Stock
(including Retirement Stock) associated with such Award shall become
available for other Awards.
(c) For purposes of this Section 3,
(i) The aggregate number of shares covered by a Retirement
Award Agreement shall be counted on the Grant Date of such Award (without
respect to the timing of the Company's obligation to issue and deliver such
shares) against the aggregate number of shares of Stock available for
granting Retirement Stock Awards under the Plan; and
(ii) the shares of Stock underlying outstanding options
(without respect to any vesting schedule) shall be counted while the Award is
outstanding against the aggregate number of shares of Stock available for
granting Awards under the Plan; and
(iii) in the event of a stock-for-stock exercise of an
option, the gross number of shares of Stock subject to the option exercised,
not the net number of shares actually issued upon exercise shall be counted
against the aggregate number of shares of Stock available for granting Awards
under the Plan.
4. ADMINISTRATION
(a) Subject to Section 4(b), the Plan shall be administered by a
committee ("Committee") which shall consist of not less than three persons
who are Directors of the Company and who are not employees of the Company.
Membership on the Committee shall be subject to such other limitations as the
Board deems appropriate to permit transactions in Stock pursuant to the Plan
to be exempt from liability under Section 16(b) of the 1934 Act pursuant to
Rule 16b-3 thereunder. Unless the Board adopts a resolution naming other
individuals to serve on the Committee, the Committee shall consist of all
Directors of the Company who are not employees of the Company. The Board may
from time to time remove members from, or add members to the Committee.
Vacancies on the Committee, however caused, shall be filled by the Board.
The Committee shall select one of its members as Chairman, and shall hold
meetings at such times and places as it may determine. A majority of the
Committee at which a quorum is present, or acts approved in writing by all of
the members of the Committee, shall be the valid acts of the Committee. No
member of the Committee shall be eligible to receive any grant of any Awards
under this Plan.
(b) The Committee, unless otherwise determined by the Board, shall
have full and final authority, in its discretion, but subject to the express
provisions of the Plan, as follows:
(i) to grant Awards;
(ii) to determine (A) when Awards may be granted, and (B)
whether or not specific Awards shall be identified with other specific
Awards, and if so, whether they shall be exercisable cumulatively with or
alternatively to such other specific Awards;
4
<PAGE>
(iii) to interpret the Plan and to make all determinations
necessary or advisable for the administration of the Plan;
(iv) to prescribe, amend, and rescind rules and regulations
relating to the Plan, including rules with respect to the exercisability and
non-forfeitability of Awards upon the termination of employment of a Grantee;
(v) to determine the terms and provisions and any restrictions
or conditions (including specifying such performance criteria as the
Committee deems appropriate, and imposing restrictions with respect to Stock
acquired upon exercise of an option or Retirement Award, which restrictions
may continue beyond the Grantee's termination of employment) of the written
agreements by which all Awards shall be evidenced ("Award Agreements") which
need not be identical and, with the consent of the Grantee where required by
contract law, to modify any such Award Agreement at any time;
(vi) to impose, incidental to an Award, conditions with respect
to competitive employment or other activities, to the extent such conditions
do not conflict with the Plan;
(vii) to cancel, with the consent of the Grantee,
outstanding Awards and to grant new Awards in substitution therefor;
(viii) to accelerate the exercisability of, and to
accelerate or waive any or all of the restrictions and conditions applicable
to any Award or any group of Awards;
(ix) subject to Section 6(c), to extend the time during which
any Award or group of Awards may be exercised;
(x) to make such adjustments or modifications to Awards to
Grantees working outside the United States as are necessary and advisable to
fulfill the purposes of the Plan which are not in conflict with the Plan; and
(xi) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the Committee
may, before or concurrently with the grant thereof, deem appropriate,
including requiring simultaneous exercise of related identified Awards, and
limiting the percentage of Awards which may from time to time be exercised by
a Grantee.
The determination of the Committee on all matters relating to the Plan or
any Award Agreement shall be conclusive and final. No member of the
Committee or the Board shall be liable for any action or determination made
in good faith with respect to the Plan or any Award.
(c) The Board may, in its discretion, reserve to itself or delegate
to another committee of the Board, any or all of the authority and
responsibility of the Committee with respect to Awards to Grantees who are
not Section 16 Grantees at the time any such delegated authority or
responsibility is exercised. Such other committee may consist of two or more
Directors who may, but need not be, officers or employees of the Company or
of any of its
5
<PAGE>
Subsidiaries. To the extent that the Board has reserved to itself or
delegated to such other committee the authority and responsibility of the
Committee, all references to the Committee in the Plan shall be to the Board
or such other committee.
5. ELIGIBILITY
Awards may be granted to any key employee (including any officer) of the
Company or any of its Subsidiaries; provided, however, that Retirement Awards
may be granted only to executive officers of the Company or its Subsidiaries
who have completed 10 years of continuous service for the Company or its
Subsidiaries; provided further that the Committee may, under appropriate
circumstances and in its discretion, waive the requirement of ten years
continuous service for a particular executive officer. In selecting the
individuals to whom Awards may be granted, as well as in determining the
number of shares of Stock subject to, and the other terms and conditions
applicable to, each Award, the Committee shall take into consideration such
factors as it deems relevant in promoting the purposes of the Plan.
6. TERMS AND CONDITIONS OF OPTION GRANTS
Stock options granted by the Committee pursuant to the Plan shall be
evidenced by Award Agreements in such form as the Committee shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(a) Each option shall state the number of shares to which it
pertains.
(b) The Option Price of any option shall not be less than 100% of
the Current Market Price of the Stock on the Grant Date.
(c) Any option granted under this Plan may be considered a
Incentive Stock Option to the extent that it:
(i) shall only be granted to individuals who are employed by
the Company or any of its Subsidiaries on the Grant Date;
(ii) shall not be granted to a 10% Owner unless the Option
Price is at least 110% of the Current Market Price of the Stock subject to
such option on the Grant Date and shall be exercisable for a period of not
more than five (5) years from the Grant Date;
(iii) except as provided in (ii) above, shall be
exercisable for a period of not more than 10 years from the Grant Date, and
shall be subject to earlier termination as provided herein or in the
applicable Award Agreement;
(iv) shall not have an aggregate fair market value (determined
for each Incentive Stock Option at its Grant Date) of Stock with respect to
which Incentive Stock Options are exercisable for the first time by such
Grantee during any calendar year (under the Plan and any other employee stock
option plan of the Grantee's employer or any parent or Subsidiary
6
<PAGE>
thereof determined in accordance with the provisions of Section 422 of the
Code), which exceeds $100,000; and
(v) shall require the Grantee to notify the Company of any
disposition of any Stock issued pursuant to the exercise of the Incentive Stock
Option under the circumstances described in Section 421(b) of the Code (relating
to certain disqualifying dispositions), within 10 days of such disposition.
Subject to the foregoing, the Committee shall have full authority and
discretion in fixing the Option Price and the terms and conditions of the
option Awards and shall be fully protected in doing so.
(d) All options shall be granted on or before August 19, 2001.
(e) Options shall not be assignable or transferable other than by
will or the laws of descent and distribution and may be exercised during the
Grantee's lifetime only by the Grantee; provided, however, that the Grantee
may, to the extent provided in the Plan in any manner specified by the
Committee, designate in writing a beneficiary to exercise his/her option
after the Grantee's death.
(f) Subject to Section 4(b)(viii) and such terms and conditions as
the Committee may impose, each option shall be exercisable in one or more
installments. Each option shall be exercised by delivery to the Company of
written notice of intent to purchase a specific number of shares of Stock
subject to the option. The Option Price of any shares of Stock as to which
an option shall be exercised shall be paid in full at the time of the
exercise. Payment may, at the election of the Grantee, be made in any one or
any combination of the following:
(i) United States dollars in cash or by check;
(ii) Stock held by the Grantee for at least 6 months prior to
exercise of the option, valued at its Current Market Price on the date of
written notice of optionee's election to exercise the option; or
(iii) with the approval of the Committee, shares of
Retirement Stock held by the Grantee for at least 6 months prior to exercise of
the option, valued at the Current Market Price of a share of Stock on the date
of exercise.
(g) Except as expressly provided in this Plan or the Award
Agreement, no option may be exercised prior to twelve months from its Grant
Date. Subject to the right of cumulation provided in the next sentence of
this Section 6(g), each option shall be exercisable to the extent provided
for in the Award Agreement as determined by the Committee in its discretion.
To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, in any subsequent period, prior to the
expiration of the term described in the Award Agreement, provided that no
option may be exercised more than ten years from its Grant Date.
Notwithstanding the preceding sentence, in the event that the optionee is a
10% Owner (determined on the Grant Date) of the Company, no option intended
to qualify as an Incentive Stock Option may be exercised more than five years
from the date it
7
<PAGE>
is granted. During the lifetime of the optionee, the option shall be
exercisable only by him and shall not be assignable or transferable by him
and no other person shall acquire any rights therein.
(h) In the event that an optionee shall cease to be employed by the
Company for any reason other than his death, Disability, or Retirement,
subject to the condition that no option shall be exercisable after the
expiration of ten years from its Grant Date (five years for an option which
is intended to qualify as an Incentive Stock Option that is granted to a 10%
Owner on the Grant Date), such optionee may, at the discretion of the
Committee, be granted the right to exercise the option at any time within
thirty (30) days after such termination of employment to the extent his right
to exercise such option had not expired pursuant to Section 6(g) of this
Plan, had vested and had not previously been exercised; provided, however,
that if the employment of the optionee is terminated by the Company or any of
its Subsidiaries for cause, fraud, breach of fiduciary duty, or other
dishonesty, the optionee's rights to exercise the option otherwise provided
herein shall expire on the last day of his employment. Whether authorized
leave of absence or absence for military or governmental service, or any
other reason, shall constitute termination of employment, for the purposes of
the Plan, shall be determined by the Committee, which determination shall be
final and conclusive.
(i) (i) In the event an optionee terminates his employment with
the Company or any Subsidiary because of a Disability, the Disabled optionee
or a lawfully appointed custodian thereof may exercise an option granted
pursuant to this Plan for a period of twelve months from the date of
termination of employment to the extent his right to exercise such option had
not expired pursuant to Section 6(g) of this Plan and had not previously been
exercised at the date of such termination.
(ii) If the employment of an optionee with the Company or any
Subsidiary is terminated by reason of the optionee's Retirement and the
optionee has been in the employ of either the Company or a Subsidiary
continuously from the date such option was granted until such Retirement
(except for leaves of absence approved in writing by the President of the
Company or the President of the Subsidiary for which the optionee works), the
entire unexercised portion of such option may be exercised by the optionee at
any time or times in whole or in part during the three-month period after
such retirement to the extent that such three-month period is included in the
remainder of such option's term.
(j) If the optionee shall die while in the employ of the Company or
any Subsidiary and shall not have fully exercised the option, the unexercised
portion of an option may be exercised at any time within one year after the
optionee's death by the executors or administrators of the optionee or by any
person or persons who shall have acquired the option directly from the
optionee by bequest or inheritance, subject to the condition that no option
shall be exercisable after the expiration of ten years from its Grant Date
(five years for an optionee under an Incentive Stock Option who is a 10%
Owner on the Grant Date).
No option shall be transferable by the optionee otherwise than by
will or the laws of descent and distribution.
8
<PAGE>
7. TERMS AND CONDITIONS OF RETIREMENT AWARDS
Grants of Stock and cash Awards intended to fund retirement benefits for
senior executives (the "Retirement Stock Awards" and "Retirement Cash Awards"
(each more fully described below), respectively, and collectively the
"Retirement Awards") pursuant to the Plan shall be authorized by the
Committee and shall be evidenced by agreements in such form as the Committee
shall from time to time approve (each a "Retirement Award Agreement"), which
agreements shall comply with and be subject to the following terms and
conditions:
(a) The Committee may grant Retirement Awards to any individual
eligible under Section 5 to receive such Retirement Awards.
(b) The Committee shall, in its discretion, determine the amount,
if any, that a Grantee shall pay for shares of Retirement Stock. Awards
shall be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. If any such cash
consideration is required, payment shall be made in full by the Grantee
before the delivery of the shares and in any event no later than 10 days
after the Grant Date for such shares. In the discretion of the Committee and
to the extent permitted by law, payment may also be made in accordance with
Section 11.
(c) Each Retirement Award Agreement shall state the number of
shares of Stock and the amount of cash to which it pertains.
(d) The Retirement Award Agreement shall provide for an aggregate
Award of Retirement Stock which the Company will agree to issue and deliver
to the Grantee. Such Retirement Stock Award will be issued and delivered to
the Grantee in equal annual installments commencing with the Grant Date and
continuing over a period of years to be determined by the Committee and set
forth in the Retirement Award Agreement, subject to the requirement that the
Grantee be employed by the Company or any Subsidiary on the last day of the
fiscal year in which Retirement Stock is issued and delivered; provided
however, the Retirement Award Agreement may include a provision which excepts
from this requirement the Grantee's death, disability or other involuntary
termination of employment (excluding for cause) which occurs during the same
fiscal year. Unless otherwise provided in the Agreement, the Retirement Award
Agreement will have an initial term of five (5) years. In its discretion,
the Committee may provide that the term of a Retirement Award Agreement be
automatically extended for additional one-year periods until the Company
gives the Grantee notice of its intention not to extend the Agreement at the
end of its then-current term.
(e) The Grantee may not sell, transfer, pledge, hypothecate, or
otherwise transfer any shares of Retirement Stock he or she receives under
the Plan during any period in which he or she is employed by the Company or
any Subsidiary; provided, however, that following the earlier of (i)
termination of the employment of the Grantee with the Company or any
Subsidiary or (ii) the Grantee's attainment of normal retirement age (whether
or not Grantee actually retires), all such restrictions with respect to
Retirement Stock which has been issued and delivered to such Grantee prior to
such time shall terminate. Notwithstanding the above, no Grantee may sell,
transfer, pledge,
9
<PAGE>
hypothecate any shares of Retirement Stock he or she receives during the six
months immediately following the later of Grant Date or the date the Plan is
approved by the Company's stockholders unless the Grantee dies before the
expiration of the six month period. Each share of Retirement Stock subject
to such restrictions shall bear an appropriate legend specifying that such
share is non-transferable and subject to the restrictions set forth in the
Plan and the Retirement Award Agreement. When all applicable restrictions
have ended, the Company shall cause certificates for such shares to be issued
or reissued without such legend.
(f) In connection with any Retirement Stock Award, the Committee
may grant cash bonus awards ("Retirement Cash Awards") to Grantees solely in
order to, and in an amount it determines will, cover the federal and state
income tax liability, and any other tax liability, to the Grantee, created
by, or arising in connection with, the receipt of the Retirement Award by the
Grantee. The Retirement Award Agreement shall provide that Retirement Cash
Awards will be calculated annually at the time of the issuance of an annual
installment of Retirement Stock to which the Retirement Cash Award relates by
using the same maximum marginal federal and state income tax percentage which
was used in the prior year and the Current Market Price of the Retirement
Stock being issued in such year on the date of such issuance (unless the
Committee approves an adjustment to that formula).
(g) The Retirement Award shall be issued and delivered to the
Grantee in accordance with the terms set forth in the Retirement Award
Agreement; provided, however, that the Company shall have no obligation to
issue or deliver any Retirement Award under a Retirement Award Agreement to
any Grantee following (i) the termination of his employment with the Company
or its Subsidiaries or (ii) any breach of the Grantee's obligations under the
Retirement Award Agreement.
(h) Any other provision of the Plan or the Retirement Award
Agreement to the contrary notwithstanding, the Committee may at any time
remove or limit any restrictions, if it determines that conditions, including
but not limited to, changes in the economy, changes in competitive
conditions, changes in laws or government regulations, changes in generally
accepted accounting principles, changes in the Company's accounting policies,
acquisitions or dispositions, or the occurrence of other unusual, unforseen,
or extraordinary events, so warrant.
(i) Notwithstanding the fact that the Company delivers notice of
its intention not to extend the term of a Retirement Award Agreement at the
end of its then current term (if such Agreement provides for such a notice),
the Company shall remain obligated to issue and deliver all scheduled annual
Retirement Awards in accordance with the Retirement Award Agreement.
8. NOTIFICATION UNDER CODE SECTION 83(b)
The Committee may, on the Grant Date or any later date, prohibit a
Grantee from making the election described in this Section 8. If the
Committee has not prohibited such Grantee from making such election, and the
Grantee, in connection with the exercise of any option or the grant of
Retirement Stock, makes the election permitted under Section 83(b) of the
Code (i.e., an election to include in such Grantee's gross income in the year
of
10
<PAGE>
transfer the amounts specified in Section 83(b) of the Code), such Grantee
shall notify the Company of such election within 10 days of filing notice of
the election with the Internal Revenue Service, in addition to any filing and
notification required pursuant to regulations issued under the authority of
Section 83(b) of the Code.
9. MANDATORY WITHHOLDING OF TAXES
(a) Whenever under the Plan, cash or shares of Stock are to be
delivered upon exercise or payment of an Award or any other event occurs
which subjects the Grantee to income taxes with respect to rights and
benefits hereunder, the Company shall be entitled to require as a condition
of delivery of the Award (i) that the Grantee remit an amount sufficient to
satisfy all federal, state, and local withholding tax requirements related
thereto, (ii) the withholding of such sums from compensation otherwise due to
the Grantee or from any shares of Stock due to the Grantee under the Plan, or
(iii) any combination of the foregoing.
(b) If any disqualifying disposition described in Section 6(c)(v)
is made with respect to shares of Stock acquired by exercising an Incentive
Stock Option granted pursuant to the Plan or any election described in
Section 8 is made, then the person making such disqualifying disposition or
election shall remit to the Company an amount sufficient to satisfy all
federal, state, and local withholding taxes thereby incurred; provided that,
in lieu of or in addition to the foregoing, the Company shall have the right
to withhold such sums from compensation otherwise due to the Grantee or from
any shares of Stock due to the Grantee under the Plan.
10. LOANS
With the approval of the Committee, the Grantee may borrow from the
Company all or any portion of the funds needed to pay the Option Price or to
pay for Retirement Stock on such terms and conditions as the Committee deems
appropriate, provided that (i) the interest rate for any such loan by the
Company shall not be less than the "applicable federal rate" (as defined by
Code Section 1274(d)(1)(A)) in effect on the date of such loan or any other
rate as necessary to avoid the imputation of interest under the Code or other
applicable law, (ii) proceeds of the loan are used solely to pay either the
exercise price of an option or to pay for Retirement Stock granted pursuant
to this Plan, and (iii) the Grantee executes a promissory note and such other
documents as the Committee deems appropriate to evidence the Grantee's
indebtedness to the Company, and pledges the Stock received in exchange for
such borrowed funds as Collateral for such loan.
11. SECURITIES LAW MATTERS
(a) If the Committee deems it necessary to comply with the
Securities Act of 1933, Committee may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for shares of Stock.
(b) If, based upon the opinion of counsel for the Company, the
Committee determines that the exercise or non-forfeitability of, or delivery
of benefits pursuant to, any Award would violate any applicable provision of
11
<PAGE>
(i) federal or state securities laws or (ii) the listing requirements of any
national securities exchange on which are listed any of the Company's equity
securities, then the Committee may postpone any such exercise,
non-forfeitability or delivery, as the case may be, but the Company shall use
its best efforts to cause such exercise, non-forfeitability or delivery to
comply with all such provisions at the earliest practicable date.
(c) With respect to Section 16 Grantees, transactions under this
Plan are intended to comply with all applicable conditions of Rule 16b-3 or
its successors under the 1934 Act. To the extent that any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee.
12. FUNDING; RESERVES
Cash benefits payable under the Plan to any person shall be paid directly
by the Company. The Company shall not be required to fund, or otherwise
segregate assets to be used for payment of, cash benefits under the Plan.
Neither the Plan nor any Award shall create or be construed to create a trust
or separate fund of any kind or a fiduciary relationship between the Company
or any Subsidiary and a Grantee or any other person. To the extent that any
person acquires a right to receive payments from the Company or any
Subsidiary pursuant to an Award, such right shall be no greater than the
right of an unsecured general creditor of the Company or any Subsidiary. The
Board shall cause the Company to reserve shares of Stock from its authorized
but unissued shares for the purpose of making available shares of Stock to
fund the Awards.
13. NO EMPLOYMENT RIGHTS
Neither the establishment of the Plan, nor the granting of any Award nor
the execution of an Award Agreement shall be construed to (a) give any
Grantee the right to remain employed by the Company or any of its
Subsidiaries or to any benefits not specifically provided by the Plan or an
Award Agreement, or (b) in any manner modify the right of the Company or any
of its Subsidiaries to modify, amend, or terminate any of its employee
benefit plans. Further, the Company or Subsidiary may at any time dismiss a
Grantee from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
14. RIGHTS AS A STOCKHOLDER
A Grantee shall not, by reason of any Award have any right as a
stockholder of the Company with respect to the shares of Stock which may be
deliverable in the future upon exercise of such Award, or otherwise as
provided in an Award Agreement, until Stock has been actually issued and
delivered to the Grantee. Shares of Retirement Stock issued and delivered to
a Grantee in accordance with the Retirement Award Agreement shall confer on
the Grantee all rights of a stockholder of the Company, except as otherwise
provided in the Plan or the specific Retirement Award Agreement.
12
<PAGE>
15. NATURE OF PAYMENTS
Any and all grants, payments of cash, or deliveries of shares of Stock
hereunder shall constitute special incentive payments to the Grantee and
shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purposes of determining any pension,
retirement, death or other benefits under (a) any pension, retirement,
profit-sharing, bonus, life insurance or other employee benefit plan of the
Company or any of its Subsidiaries or (b) any agreement between the Company
or any Subsidiary, on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.
16. NON-UNIFORM DETERMINATIONS
Determinations made by the Committee or the Board under the Plan do not
need to be uniform and may be made by the Committee or the Board selectively
among persons who receive, or are eligible to receive, Awards (whether or not
such persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations and to enter into non-uniform and
selective Award Agreements, as to (a) the identity of the Grantees, (b) the
terms and provisions of Awards, and (c) the treatment under Section 13 of
terminations of employment. Notwithstanding the foregoing, the Committee's
interpretation of Plan provisions shall be uniform as to similarly situated
Grantees.
17. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
(a) Subject to any required action by the Stockholders, the
Committee shall make such adjustment, as it shall deem equitable, to any or
all of:
(i) the aggregate numbers of shares of Stock available under
Sections 3(a) and 3(b);
(ii) the number of shares of Stock subject to an option or
shares of Retirement Stock covered by an Award;
(iii) the Option Price;
(iv) the Retirement Cash Award;
(v) any other terms or provisions of any outstanding grants of
options or Retirement Awards:
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, acquisition of property
or shares, separation, asset spin-off, reorganization, stock rights offering,
liquidation or similar event, of or by the Company, or, if deemed
appropriate, the Committee may make provisions for a cash payment to the
holder of an outstanding Award; provided, however, if the Company shall be
the surviving corporation in any merger or consolidation, each outstanding
option or Award Agreement shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to the option or
Award Agreement would have been entitled; and provided further, upon a
dissolution or liquidation of the Company, or a merger or consolidation in
which the Company is not the
13
<PAGE>
surviving corporation, or a change in control of the Company, as defined in
subsection (b) below, each optionee shall have the right to exercise his
option in whole or in part notwithstanding the provisions of Section 6(g)
above: (i) immediately prior to such dissolution or liquidation or merger or
consolidation in which the Company is not the surviving corporation, and
thereafter; or (ii) after such change of control. However, with respect to
Awards of Incentive Stock Options no such adjustment shall be authorized to
the extent that the authority to make such adjustments would cause the Plan
to violate Section 422(b)(1) of the Code or any successor provision thereto
and the number of shares subject to any Award denominated in shares of Stock
shall always be a whole number.
(b) "Change of control" of the Company shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 ("Exchange Act"); provided that, without limitation,
such a change in control shall be deemed to have occurred if: (i) any person
(as that term is defined in Section 13(d) and Section 14(d) of the Exchange
Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20 percent, or more of the combined
voting power of the Company's then outstanding securities; or (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constitute all members of the Board who are not employed by the
Company (the "Outside Directors") shall cease for any reason to constitute at
least a majority of the Outside Directors, unless the election of each
Outside Director, who was not an Outside Director at the beginning of such
period, was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period; or, (iii)
there shall be consummated (A) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant
to which shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or, (iv) the stockholders
of the Company approve a plan or proposal for the liquidation or dissolution
of the Company.
(c) In the event of a change in the Stock of the Company as
presently constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par
value or without par value, the shares resulting from any such change shall
be deemed to be the Stock within the meaning of the Plan.
(d) Except as hereinbefore expressly provided in this Section 18,
the Grantee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock
of any class or by reason of any change of control, dissolution, liquidation,
merger, or consolidation or spin-off of assets or stock of another
corporation, and any issue of the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect,
14
<PAGE>
and no adjustment by reason thereof shall be made with respect to, the number
or price of shares of Stock subject to Awards.
The grant of an Award pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
18. AMENDMENT OF THE PLAN
Upon recommendation of the Committee, the Board of Directors of the
Company may insofar as permitted by law, from time to time, with respect to
any shares at the time not subject to options or Award Agreements, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever except
that, without approval of the stockholders, no such revision or amendment
shall: change the number of shares subject to the Plan; change the
designation of the class of employees eligible to receive Awards; decrease
the price at which Options may be granted; remove the administration of the
Plan from the Committee other than as expressly provided by the Plan; extend
the period during which Awards may be granted; or render any member of the
Committee eligible to receive an Awards under the Plan while serving thereon.
Furthermore, the Plan may not without the approval of the stockholders be
amended in any manner that will cause Options issued under it to fail to
qualify as Incentive Stock Options.
Except as provided in this Section 19, the Board shall, from time to
time, revise, modify, or amend the Plan, in part or in total, without
approval of the stockholders, as may be necessary to satisfy the requirements
of the Code and any amendments or revisions thereof, such that certain stock
options which are granted under the Plan may qualify as Incentive Stock
Options, and to satisfy all other applicable laws and regulations.
19. TERMINATION OF THE PLAN
The Plan shall terminate on the tenth (10th) anniversary of the Effective
Date or at such earlier time as the Board may determine. Any termination,
whether in whole or in part, shall not affect any Award then outstanding
under the Plan.
20. OTHER COMPENSATION PLANS
Nothing contained in the Plan shall prevent the Company or any Affiliate
from adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.
21. NO ILLEGAL TRANSACTIONS
The Plan and all Awards granted pursuant to it are subject to all laws
and regulations of any governmental authority which may be applicable
thereto; and notwithstanding any provision of the Plan or any Award, Grantees
shall not be entitled to exercise Awards or receive the benefits thereof and
the Company shall not be obligated to deliver any Stock or pay any benefits
to a
15
<PAGE>
Grantee if such exercise, delivery, receipt or payment of benefits would
constitute a violation by the Grantee or the Company of any provision of any
such law or regulation.
22. CONTROLLING LAW
The law of the State of Illinois, except its law with respect to choice
of law and except as to matters relating to corporate law (in which case the
corporate law of the State of Delaware shall control), shall be controlling
in all matters relating to the Plan.
23. TAX LITIGATION
The Company shall have the right, but not the obligation, to contest, at
its expense, any tax ruling or decision, administrative or judicial, on any
issue that is related to the Plan and that the Company believes to be
important to Grantees and to conduct any such contest or any litigation
arising therefrom to a final decision.
24. SEVERABILITY
If all or any part of the Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall
not serve to invalidate any portion of the Plan not declared to be unlawful
or invalid. Any Section or part of a Section so declared to be unlawful or
invalid shall, if possible, be construed in a manner in which will give
effect to the terms of such Section or part of a Section to the fullest
extent possible while remaining lawful and valid.
25. INDEMNIFICATION
Each person who is or at any time serves as a member of the Board or the
Committee shall be indemnified and held harmless by the Company against and
from: (i) any loss, cost, liability or expense, including attorneys' fees
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, that
may be imposed upon or reasonably incurred by such person in connection with
or resulting from any claim, action, suit, or proceeding to which such person
may be a party or in which such person may be involved by reason of any
action or failure to act under the Plan; and (ii) any and all amounts paid by
such person in satisfaction of judgment in any such action, suit or
proceeding relating to the Plan. Each person covered by this indemnification
provision shall give the Company an opportunity, at its own expense, to
handle and defend the same before such person undertakes to handle and defend
it on such person's own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the By-Laws of the Company, as a matter of law, or
otherwise, or any power that the Company may have to indemnify such person or
hold such person harmless.
26. RELIANCE ON REPORTS
Each member of the Board and the Committee shall be fully justified in
relying or acting in good faith upon any report made by the independent
public
16
<PAGE>
accountants of, or counsel for, the Company and upon any other information
furnished in connection with the Plan. In no event shall any person who is
or shall have been a member of the Board or the Committee be liable for any
determination made or other action taken or any failure to act in reliance
upon any such report or information or for any action taken, including the
furnishing of information, or failure to act, if done in good faith.
27. EXPENSES
The Company shall bear all expenses of administering the Plan.
28. TITLES AND HEADINGS
The titles and headings of the sections in the Plan are for convenience of
reference only, and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.
29. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Stock pursuant to any
Awards will be used for general corporate purposes.
Date Plan was adopted by Board of Directors: June 30, 1993
Date Plan was approved by Stockholders: November 16, 1993
Date Plan was amended by Board of Directors: June 25, 1997
Date Plan was amended by Board of Directors: August 28, 1997
Date amended Plan was approved by Stockholders: 1997
------------
17
<PAGE>
EXHIBIT 10(d)-2
RETIREMENT AWARD AGREEMENT
This Retirement Award Agreement ("Agreement") is entered into as of this
30th day of June, 1997 between QUIXOTE CORPORATION ("the Company"), a Delaware
corporation whose principal place of business is Chicago, Illinois, and
DANIEL P. GOREY of Palatine, Illinois ("Employee").
RECITALS
WHEREAS, the Board of Directors of the Company adopted the Quixote
Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan")
by amending and restating the Quixote Corporation 1991 Incentive Stock Option
Plan, which is subject to approval by the stockholders of the Company; and
WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of
the Board of Directors (the "Committee") to select certain employees of the
Company or any of its subsidiaries who are key executives and who have completed
ten years of continuous service for the Company or its subsidiaries to receive
Retirement Awards; and
WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the
form of Retirement Stock Awards and Retirement Cash Awards as those terms are
defined in the Long-Term Plan; and
WHEREAS, the Committee has selected the Employee as a grantee of a
Retirement Award subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, the Long-Term Plan requires that any Retirement Awards be
documented by a written agreement with such terms and conditions as the
Committee may determine.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. GRANT OF RETIREMENT AWARD.
(a) Subject to the other terms and conditions of this Agreement and
the Long-Term Plan, the Company hereby grants to Employee an aggregate
Retirement Stock Award of 51,409 shares of the Company common stock, $.01 2/3
par value (the "Stock"), to be issued and delivered to Employee as fully paid
and non-assessable Stock on the following Issuance Dates in the following
amounts:
<PAGE>
Number of
Issuance Date Shares
------------- --------------
June 30, 1997 2,856 shares
June 30, 1998 2,856 shares
June 30, 1999 2,856 shares
June 30, 2000 2,856 shares
June 30, 2001 2,856 shares
June 30, 2002 2,856 shares
June 30, 2003 2,856 shares
June 30, 2004 2,856 shares
June 30, 2005 2,856 shares
June 30, 2006 2,856 shares
June 30, 2007 2,856 shares
June 30, 2008 2,856 shares
June 30, 2009 2,856 shares
June 30, 2010 2,856 shares
June 30, 2011 2,856 shares
June 30, 2012 2,856 shares
June 30, 2013 2,856 shares
June 30, 2014 2,857 shares
(b) The Company shall issue and deliver the shares set forth in paragraph
(a) above to the Employee on each Issuance Date only if on such date the
Employee is employed by the Company or its subsidiaries. Notwithstanding the
immediately preceding sentence, the Company shall issue and deliver the shares
set forth above on an Issuance Date to the Employee even if the Employee is not
employed by the Company or its subsidiaries on such Issuance Date solely because
the Employee's employment was terminated during the fiscal year ending on that
Issuance Date by reason of the Employee's death, disability or other involuntary
termination of employment (excluding termination for cause). The Company will
deliver to the Employee a Certificate with respect to that number of shares
issued and delivered as of the Issuance Date.
2. GRANT OF RETIREMENT CASH AWARD.
(a) Subject to the other terms and conditions of this Agreement and
the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash
Award for the sole purpose of paying federal and state income taxes arising from
the issuance and delivery of Retirement Awards to the Employee pursuant to this
Agreement, calculated as follows: As of each Issuance Date, the Employee will
receive a Retirement Cash Award equal to the quotient of (x) the Current Market
Price of the Retirement Stock Award issued and delivered on that Issuance Date
divided by (y) the percentage which is equal to 1 minus the maximum marginal
-2-
<PAGE>
federal and state income tax rate, less the Current Market Price of the
Retirement Stock Award (the "Retirement Cash Award Formula").
A Retirement Cash Award shall only be paid in connection with the issuance
and delivery of Retirement Stock under this Agreement. The Retirement Cash
Award Formula may be changed by the Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the
Employee, but shall be paid to the appropriate federal and state tax officials
by the Company on behalf of Employee. The Company will give the Employee
written evidence of such payment.
(c) For purposes of this Agreement, the parties agree that, given
both the level of activity in the public trading of the Company's Stock and the
price volatility of the Stock, the fair market value of the Stock shall mean the
Current Market Price. The term "Current Market Price" of the Stock means the
average of the daily closing prices for the thirty consecutive business days
commencing no more than forty five business days before the day in question.
The closing price for each day shall be the last reported sale price determined
in the regular way or, in case no such reported sales takes place on such day,
the average of the last reported bid and asked prices determined the regular
way, in either case in the principal national securities exchange in which the
Stock is admitted to trading a listed, or if not listed or admitted to trading
on any national securities exchange, the average of the closing bid and asked
prices as reported by NASDAQ or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair market price
is determined by the Board.
3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK.
(a) As a condition of this Award, the Employee agrees that he will not
sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock
he receives pursuant to this Agreement during the period he is employed by the
Company or its subsidiaries; provided, however, following the earlier of (i) the
termination of the employment of the Employee with the Company or its
subsidiaries, or (ii) the Employee's attaining age 65 (whether or not the
Employee actually retires from employment), these restrictions shall terminate.
The Employee agrees that the Company shall instruct its transfer agent to place
a legend on each share certificate representing the Retirement Stock with
respect to such restrictions in substantially the following form, and the
Company shall cause
-3-
<PAGE>
such certificates to be issued without a legend when the applicable
restrictions have terminated as provided herein:
The sale, transfer, pledge, hypothecation or other transfer
of the shares represented by this Certificate are subject to
the terms and conditions of a Retirement Award Agreement
dated as of August 22, 1995 by and between Quixote
Corporation and Daniel P. Gorey. The Retirement Award
Agreement provides that the restrictions shall automatically
expire upon the earlier of (i) the termination of Mr.
Gorey's employment by Quixote Corporation or its
subsidiaries, or (ii) Mr. Gorey's attaining 65 years of age.
(b) Unless on an Issuance Date, there is in the opinion of Company's
counsel a valid and effective registration statement under the Securities Act of
1933, as amended, and an appropriate qualification and registration under
applicable state securities law with respect to the Retirement Stock to be
issued and delivered, the Employee agrees, prior to the issuance and delivery of
the Retirement Stock, to provide the Company a representation that he is
acquiring the Stock for his own account for investment and not with a view to,
or for sale in connection with, the resale or distribution of any such Stock and
shall provide such other representations and covenants to the Company as may, in
the opinion of its counsel, be required. In the event that any Retirement
Stock issued is not so registered, then the Employee agrees that the
certificates representing the Retirement Stock shall bear a restrictive legend,
and that stop transfer instructions shall be issued to Company's transfer agents
until such time as the Retirement Stock is registered.
(c) If at any time the Committee determines, in its discretion, that
the listing, registration or qualification of the Retirement Stock upon any
securities exchange or under any state or federal law, or that the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of the Award or in connection
with the issuance of Retirement Stock thereunder, the Award may not be granted
in whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
-4-
<PAGE>
4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK.
(a) The Employee shall not by reason of any Retirement Stock Award or
by reason of this Agreement have any right as a stockholder of the Company with
respect to the shares of Stock to which the Company has agreed to issue and
deliver to the Employee in the future until such time as the Retirement Stock
has been actually issued and delivered to the Employee. Except as provided in
the Long-Term Plan, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to an Issuance Date for such
Retirement Stock, and all adjustments to the Retirement Stock by reason of a
stock dividend, merger, consolidation or otherwise shall be made in accordance
with the terms of the Long-Term Plan.
(b) This Agreement shall not affect in any way the right or power of
the Company to make adjustments, reclassification, reorganizations or changes of
its capital or business structure or to merge, consolidate, dissolve, liquidate,
sell or transfer all or any part of its business or assets.
5. NO EMPLOYMENT RIGHTS.
Neither the establishment of the Long-Term Plan nor the granting of
this Award nor the execution of this Agreement shall be construed to give the
Employee the right to remain employed by the Company or any of its subsidiaries,
or to any benefits not specifically provided by the Long-Term Plan or by this
Agreement, or in any manner modify the right of the Company or any of its
subsidiaries to modify, amend or terminate any of its employee benefit plans or
other arrangements available to Employee. The Company and or any of its
subsidiaries may at any time dismiss the Employee from employment free from any
liability or any claim under the Long-Term Plan.
6. SUCCESSORS AND ASSIGNS.
The Award shall be binding in accordance with its terms upon any
successors of the Company and upon the heirs, executors, administrators and
successors of Employee.
7. GOVERNING LAW.
This Agreement and the Retirement Award shall be governed by and
construed in accordance with the laws of the State of Illinois relating to
contracts made and to be performed in that State.
-5-
<PAGE>
8. TERMINATION.
(a) This Agreement shall terminate upon the earlier of (i) July 1,
2014 or (ii) the date of termination of the Employee's employment with the
Company or subsidiaries, unless extended pursuant to Section 8(b) below.
(b) Unless on or before March 1 of each year commencing March 1,
1998, the Company notifies the Employee in writing that the Company does not
intend to extend the term of this Agreement, the term of this Agreement shall
automatically be extended for an additional period of one year; provided,
however, under no circumstances shall the term of this Agreement extend beyond
July 1, 2014.
9. NOTICES.
All notices, certificates or other communication shall be sufficiently
given when given in writing and mailed by first class mail, postage prepaid,
with proper address as indicated below. Any of such parties may by written
notice given to the other party designate any address or addresses to which
notices, certificates or other communications to them shall be sent when
required as contemplated by this Agreement. Until otherwise provided by the
respective parties, all notices, certificates and communications to each of the
parties shall be addressed as follows:
To the Company: Quixote Corporation
One East Wacker Drive
Suite 3000
Chicago, IL 60601
Attn: Philip E. Rollhaus, Jr.
With a copy to: James H. DeVries, Esq.
Quixote Corporation
One East Wacker Drive
Suite 3000
Chicago, IL 60601
To the Employee: Daniel P. Gorey
133 North Hale
Palatine, IL 60067
-6-
<PAGE>
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the day and year first above written.
QUIXOTE CORPORATION
By: /s/ Leslie J. Jezuit
--------------------------
Its: President & COO
------------------------
ATTEST: /s/ Joan R. Riley
-------------------
/s/ Daniel P. Gorey
---------------------
Daniel P. Gorey
-7-
<PAGE>
EXHIBIT 10(e)
PROMISSORY NOTE
$525,927.14 Houston, Texas December 31, 1996
FOR VALUE RECEIVED, Quixote Steno Corporation, a Delaware corporation, and
Quixote Corporation, a Delaware corporation, jointly and severally (herein
called "Maker," whether one or more), hereby promises to pay to the order of
Coventry Fund III, Ltd., a Texas limited partnership ("Payee"), at 1111 Bagby,
Suite 1600, Houston, Texas or at such other address as Payee shall from time to
time specify in writing, the principal sum of $525,927.14, together with
interest on the unpaid principal balance of this Note from day to day
outstanding, as hereinafter provided, but calculated on the basis of actual days
elapsed over a 365 day year.
1. INTEREST RATE.
The unpaid principal balance of this Note shall not bear interest until past
due.
2. DEFAULT RATE.
Any principal or interest which is not paid within five (5) days after it
becomes due shall (to the extent permitted by applicable law) bear interest at a
varying rate per annum equal to the "Maximum Rate" from the date due and payable
until paid. "Maximum Rate" means the lesser of (a) eighteen percent (18%) per
annum, and (b) the maximum nonusurious rate of interest per annum permitted by
whichever of applicable United States federal law or Texas law permits the
higher interest rate, including to the extent permitted by applicable law, any
amendments thereof hereafter or any new law hereafter coming into effect to the
extent a higher Maximum Rate is permitted thereby. The Maximum Rate shall be
applied by taking into account all amounts characterized by applicable law as
interest on the debt evidenced by this Note, so that the aggregate of all
interest does not exceed the maximum nonusurious amount permitted by applicable
law.
3. FLUCTUATION OF RATE.
Without notice to Maker or anyone else, the Maximum Rate shall automatically
fluctuate upward and downward as and in the amount such rate or rates of
interest permitted by applicable law, respectively, fluctuate.
4. PAYMENT TERMS.
This Note shall be due and payable in 48 monthly installments, each in the
amount of $10,956.82. The 1st installment in the amount of $10,956.82 shall be
due and payable on or before January 1, 1997, and a like installment shall be
due and payable on the 1st day of each succeeding calendar month thereafter
until this Note shall have been fully paid and satisfied;
<PAGE>
provided, that on December 1, 2000, the final maturity date of this Note, the
entire balance of this Note then unpaid shall be finally due and payable.
5. APPLICATION OF PAYMENTS; LEGAL TENDER.
All amounts paid hereunder shall be applied first to all interest then accrued
and unpaid hereunder, and the balance, if any, to principal. All sums called
for, payable or to be paid hereunder shall be paid in lawful money of the United
States of America which at the time of payment is legal tender for the payment
of public and private debts therein.
6. PREPAYMENT.
Maker shall have the right to prepay this Note, in whole or in part, at any time
without penalty or premium.
7. PURPOSE OF LOAN.
Reference is made to that one certain Lease Termination Agreement dated as of
December 31, 1996 by and between Quixote Steno Corporation (and acknowledged and
agreed to by Quixote Corporation) and Coventry Fund III, Ltd., a Texas limited
partnership.
Maker represents and warrants to Payee and to each present and future owner and
holder of this Note that the proceeds of this Note are for business, commercial,
investment or similar purposes and will not be used for personal, family,
household or agriculture use.
8. DEFAULT.
In the event of a default in the payment of any installment of either principal
or interest as provided for herein, or in the performance of any agreement or
covenant contained in any instrument securing payment hereof, without the giving
of any notice of any kind, the holder of this Note shall have the right and
option, to declare the unpaid balance of principal and accrued interest on this
Note at once due and payable and to foreclose or require foreclosure of any and
all liens securing payment hereof, and to exercise any and all other rights and
remedies it may have. Failure to exercise this option upon any default shall
not constitute a waiver of the right to exercise it in the event of any
subsequent default.
9. NO WAIVER OF ENFORCEMENT RIGHTS.
Neither the failure by the holder hereof to exercise, nor delay by the holder
hereof in exercising, the right to accelerate the maturity of this Note or any
other right, power or remedy upon any default shall be construed as a waiver of
such default or as a waiver of the right to exercise any such right, power or
remedy at any time. No single or partial exercise by the holder hereof of any
right, power or remedy shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy may be exercised
at any time and from time to time. All remedies provided for in this Note and
in any other Loan Document are cumulative of
<PAGE>
each other and of any and all other remedies existing at law or in equity,
and the holder hereof shall, in addition to the remedies provided herein or
in any other Loan Document, be entitled to avail itself of all such other
remedies as may now or hereafter exist at law or in equity for the collection
of the indebtedness owing hereunder, and the resort to any remedy provided
for hereunder or under any such other Loan Document or provided for by law or
in equity shall not prevent the concurrent or subsequent employment of any
other appropriate remedy or remedies. Without limiting the generality of the
foregoing provisions, the acceptance by the holder hereof from time to time
of any payment under this Note which is past due or which is less than the
payment in full of all amounts due and payable at the time of such payment,
shall not (i) constitute a waiver of or impair or extinguish the rights of
the holder hereof to accelerate the maturity of this Note or to exercise any
other right, power or remedy at the time or at any subsequent time, or
nullify any prior exercise of any such right, power or remedy; or
(ii) constitute a waiver of the requirement of punctual payment and
performance, or a novation in any respect.
10. ATTORNEYS' FEES; COLLECTION EXPENSES.
If any holder of this Note retains an attorney in connection with any default or
at maturity or to collect, enforce or defend this Note or any other Loan
Document in any lawsuit or in any probate, reorganization, bankruptcy or other
proceeding, or if Maker sues any holder in connection with this Note or any
other Loan document and does not prevail, then Maker agrees to pay to each such
holder, in addition to principal and interest, all reasonable costs and expenses
incurred by such holder in trying to collect this Note or in any such suit or
proceeding, including reasonable attorneys' fees.
11. NO USURY INTENDED; USURY SAVINGS CLAUSE.
It is the intent of Payee and Maker and all other parties to the Loan Documents
to conform to and contract in strict compliance with applicable usury law from
time to time in effect. All agreements between Payee or any other holder hereof
and Maker are hereby limited by the provisions of this paragraph which shall
override and control all such agreements, whether now existing or hereafter
arising and whether written or oral. In no way, nor in any event or contingency
(including, but not limited to, prepayment, default, demand for payment or
acceleration of the maturity of any obligation) shall the interest contracted
for, charged or received under this Note or otherwise exceed the Maximum Rate.
If, from any possible construction of any document, interest would otherwise by
payable in excess of the Maximum Rate, any such construction shall be subject to
the provisions of this paragraph and such document shall be automatically
reformed and the interest payable shall be automatically reduced to the Maximum
Rate, without the necessity of execution of any amendment or new document. If
the holder hereof shall ever receive anything of value which is characterized as
interest under applicable law and which would apart from this provision be in
excess of the Maximum Rate, an amount equal to the amount which would have
<PAGE>
been excessive interest shall, without penalty, be applied to the reduction
of the principal amount owing on the secured indebtedness in the inverse
order of its maturity and not to the payment of interest, or, at the option
of the holder hereof, be refunded to Maker or the other payor thereof if and
to the extent such amount which would have been excessive exceeds such unpaid
principal. The right to accelerate maturity of this Note or any other
indebtedness does not include the right to accelerate any interest which has
not otherwise accrued on the date of such acceleration, and the holder hereof
does not intend to charge or receive any unearned interest in the event of
acceleration. All interest paid or agreed to be paid to the holder hereof
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term (including any renewal
or extension) of such indebtedness so that the amount of interest on account
of such indebtedness does not exceed the maximum permitted by applicable law.
Notwithstanding any term or provision hereof to the contrary, Maker hereby
confirms to Payee that neither Maker nor its legal counsel is aware of any
respect as to which this Note, or the transaction in connection with which this
Note was issued, is or may be usurious and, to induce Payee to make the loan
evidenced hereby, Maker hereby agrees with and covenants to Payee that if at any
time Maker shall believe or discover that any term or provision of this Note or
any action taken by Payee in connection herewith is or may be in violation of
the usury laws or any other applicable law, Maker shall forthwith give notice to
Payee specifying with particularity the nature and extent of any such potential
violation of the usury laws or any other applicable law, and afford to Payee a
reasonable period (of not less than sixty (60) days) within which to cure same.
Maker hereby agrees with and covenants to Payee that in no instance shall Maker
make any claim, bring any suit or prosecute any cause of action in respect of
any violation of the usury laws or any other applicable law, unless, as a
condition precedent thereto, Maker has given to Payee such notice and afforded
to Payee such opportunity to cure as hereinabove provided.
12. JOINT AND SEVERAL LIABILITY; WAIVER.
If more than one person or entity executes this Note as Maker, all of said
parties shall be jointly and severally liable for payment of the indebtedness
evidenced hereby. Maker and all sureties, endorsers, guarantors and any other
party now or hereafter liable for the payment of this Note, in whole or in part,
hereby severally (i) waive demand, presentment for payment, notice of dishonor
and of nonpayment, protest, notice of protest, notice of intent to accelerate,
notice of acceleration, and all other notices (except only for any notices which
are specifically required by this Note), filing of suit and diligence in
collection this Note or enforcing any of the security herefor; (ii) agree to any
substitution, subordination, exchange or release of any such security or the
release of any party primarily or secondarily liable hereon; (iii) agree that
the holder hereof shall not be required first to institute suit or exhaust its
remedies hereon against Maker or others liable or to become liable hereon or to
enforce its rights against them or any security herefor; (iv) consent to any
extension or postponement of time of payment of this Note for any period or
periods of time and to any partial payments, before or after maturity, and to
any other indulgences with respect hereto, without notice thereof to any of
them; and (v) submit (and waive all rights to object) to personal jurisdiction
in the State of Texas, and venue in Harris County, Texas, for the enforcement of
any and all obligations under the Loan Document.
<PAGE>
1. NOTICES.
All notices permitted hereunder shall be given to the addressee at the following
address:
if to Payee: Coventry Fund III, Ltd.
c/o Coventry Development, Inc.
1111 Bagby, Suite 1600
Houston, Texas 77002
With Copy To:
Lawrence B. Chapman
Brochstein, Slobin Chapman, P.C.
One Riverway, Suite 1950
Houston, Texas 77002
if to Maker: Quixote Steno Corporation
One East Wacker Drive
Chicago, Illinois 60601
Suite 3000
Quixote Corporation
One East Wacker Drive
Chicago, Illinois 60601
Suite 3000
All notices given hereunder shall be in writing and shall be considered properly
given if mailed by first-class United States mail, postage prepaid, registered
or certified with return receipt requested, or by delivering same in person to
the addressee, or by prepaid telegram. Any notice given in accordance herewith
shall be effective upon receipt at the address of the addressee.
14. SUCCESSORS AND ASSIGNS.
This Note inures to and binds the heirs, legal representatives, successors
and assigns of Maker and Payee; provided, however, that Maker may not assign
this Note or any loan funds, or assign or delegate any of its rights or
obligations, without the prior written consent of the holder of this Note in
each instance.
15. GOVERNING LAW.
THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED
BY TEXAS LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE
UNITED STATES FEDERAL LAW.
<PAGE>
16. CAPTIONS.
The captions in this Note are inserted or convenience and are not to be used
to interpret or limit the terms herein.
MAKER:
Quixote Steno Corporation
By: /s/ Daniel P. Gorey
Name: Daniel P. Gorey
Title: Vice President
Quixote Corporation
By: /s/ Daniel P. Gorey
Name: Daniel P. Gorey
Title: Chief Financial Officer,
Vice President & Controller
<PAGE>
Exhibit 10(f)
August 12, 1997
Mr. James H. DeVries
467 Willow Road
Winnetka, IL 60093
RE: CONSULTING AGREEMENT
Dear Jim:
I am writing to summarize our agreement with respect to your performance of
consulting services for Quixote Corporation between July 1, 1997 and October 31,
1997, especially in connection with the upcoming DVA trial.
Quixote will pay you at a rate of $160 per hour, subject to a maximum of
eight (8) hours per day. Quixote is paying the current lease payments on your
Audi automobile, but you are responsible for gasoline, maintenance and
insurance. We do not anticipate being charged for any commuting time to the
Chicago office. You will also submit a weekly schedule of your activities to
me, and all air travel plans, both of which will be approved in advance. We
anticipate that invoices for your services and expenses shall be provided
monthly within 15 business days after the end of each month. Quixote will
reimburse your travel expenses upon receipt of our standard expense account
form.
Sincerely,
/s/ Leslie J. Jezuit
------------------------
Agreed: /s/ James H. DeVries
-----------------------------
<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE
COMMON AND COMMON EQUIVALENT SHARE
For the year ended June 30, 1997
Fully
Primary Diluted
------- -------
Net loss as reported $(3,831,000) $(3,831,000)
=========== ===========
Average common shares outstanding
would be adjusted for the additional
shares that would be issued assuming
conversion of the debentures and
exercise of stock options and
warrants as follows:
Weighted average shares outstanding 7,996,700 7,996,700
Shares assumed issued upon conversion
of debentures
Incremental shares outstanding
assuming exercise of stock options
and warrants using the treasury
stock method 42,193 42,193
--------- ---------
Average common and common equivalent
shares outstanding (B) 8,008,893 8,008,893
========= =========
Loss per common and common
equivalent share outstanding (A/B) $(.48) $(.48)
========= =========
<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE
COMMON AND COMMON EQUIVALENT SHARE
For the year ended June 30, 1996
Fully
Primary Diluted
------- -------
Net loss as reported ($9,892,000) ($9,892,000)
Add interest expense and deferred
charge (net of income taxes) assuming
conversion of debentures 886,000 (a)
----------- -----------
Adjusted net loss for
computation (A) ($9,892,000) ($9,006,000)
=========== ===========
Average common shares outstanding
would be adjusted for the additional
shares that would be issued assuming
conversion of the debentures and
exercise of stock options as follows:
Weighted average shares outstanding 7,875,585 7,875,585
Shares assumed issued upon conversion
of debentures 947,638
Incremental shares outstanding
assuming exercise of stock options
and warrants using the treasury
stock method 128,034 128,034
Shares issuable under retirement plan 305 305
--------- ---------
Average common and common equivalent
shares outstanding (B) 8,003,924 8,951,562
========= =========
Loss per common and common
equivalent share outstanding (A/B) ($1.24) ($1.01)
========== ==========
NOTE:
(a) The net loss for the fully diluted calculation is adjusted for interest
expense and deferred charge amortization, assuming exercise of the
conversion privilege on the 8% convertible debentures.
<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE
COMMON AND COMMON EQUIVALENT SHARE
For the year ended June 30, 1995
Fully
Primary Diluted
------- -------
Net earnings as reported $5,950,000 $5,950,000
Add interest expense and deferred
charge (net of income taxes) assuming
conversion of debentures 981,000 (a)
---------- ----------
Adjusted net earnings for
computation (A) $5,950,000 $6,931,000
========== ==========
Average common shares outstanding
would be adjusted for the additional
shares that would be issued assuming
conversion of the debentures and
exercise of stock options and
warrants as follows:
Weighted average shares outstanding 7,819,537 7,819,537
Shares assumed issued upon conversion
of debentures 1,051,316
Incremental shares outstanding
assuming exercise of stock options
and warrants using the treasury
stock method 280,848 280,848
---------- ---------
Average common and common equivalent
shares outstanding (B) 8,100,385 9,151,701
========= =========
Earnings per common and common
equivalent share outstanding (A/B) $ .73 $ .76
========= ==========
NOTE:
(a) Net earnings for the fully diluted calculation is adjusted for interest
expense and deferred charge amortization, assuming exercise of the
conversion privilege on the 8% convertible debentures.
<PAGE>
EXHIBIT 21
QUIXOTE CORPORATION & SUBSIDIARIES
SUBSIDIARIES OF THE COMPANY
as of June 30, 1997
Jurisdiction
Under Which
QUIXOTE CORPORATION (PARENT) Organized
- ---------------------------- -------------
Energy Absorption Systems, Inc. Delaware
Composite Components, Inc. Delaware
E-Tech Testing Services, Inc. Delaware
Safe-Hit Corporation Nevada
Spin-Cast Plastics, Inc. Indiana
LaserVideo Acquisition Corporation Delaware
Legal Technologies, Inc. Delaware
Litigation Communications, Inc. Delaware
Quixote Steno Corporation Delaware
Quixote DPI Corporation Delaware
Court Technologies, Inc. Delaware
Quixote IIS Corporation Delaware
Quixote Limited United Kingdom
Quixote LSI Corporation Delaware
QualAir Corporation Delaware
Quixote Foreign Sales Corporation U.S. Virgin Islands
Quixote Laser Corporation Delaware
Quixote Research Corporation Delaware
All of the subsidiaries listed above are wholly-owned by Quixote except as
follows:
Energy Absorption Systems, Inc. is the sole shareholder of Composite
Components, Inc., E-Tech Testing Services, Inc., Safe-Hit Corporation and
Spin-Cast Plastics, Inc.
Legal Technologies, Inc. is the sole shareholder of Litigation
Communications, Inc. and Quixote Steno Corporation.
Quixote Steno Corporation is the sole shareholder of Quixote DPI Corporation,
Quixote IIS Corporation, Quixote Limited and Quixote LSI Corporation.
Quixote DPI Corporation is the sole shareholder of Court Technologies, Inc.
The Company owns all of the preferred stock of LaserVideo Acquisition
Corporation (LVAC) and shares voting power with respect to the outstanding
common stock. The preferred stock has voting rights and represents 50% of
the voting stock of LVAC.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements on
Form S-8 (File Nos. 2-76697, 33-1805, 33-22289, 33-50248 and 33-74488) and the
registration statements on Form S-3 (Files Nos. 2-96502 and 33-14873 Amendment
No. 1) of our reports, dated August 8, 1997, accompanying the consolidated
financial statements and financial statement schedules of Quixote Corporation
and Subsidiaries as of June 30, 1997 and 1996, and for each of the years ended
June 30, 1997, 1996 and 1995, which report is included in this Annual Report on
Form 10-K of Quixote Corporation.
/s/ Coopers & Lybrand L.L.P.
- -------------------------------
Chicago, Illinois
September 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 18,463,000
<SECURITIES> 0
<RECEIVABLES> 8,659,000
<ALLOWANCES> 165,000
<INVENTORY> 4,224,000
<CURRENT-ASSETS> 33,638,000
<PP&E> 21,355,000
<DEPRECIATION> 8,452,000
<TOTAL-ASSETS> 55,220,000
<CURRENT-LIABILITIES> 12,999,000
<BONDS> 0
0
0
<COMMON> 146,000
<OTHER-SE> 41,509,000
<TOTAL-LIABILITY-AND-EQUITY> 55,220,000
<SALES> 45,037,000
<TOTAL-REVENUES> 45,037,000
<CGS> 22,788,000
<TOTAL-COSTS> 22,788,000
<OTHER-EXPENSES> 16,473,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 497,000
<INCOME-PRETAX> 3,664,000
<INCOME-TAX> 757,000
<INCOME-CONTINUING> 2,907,000
<DISCONTINUED> (6,738,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,831,000)
<EPS-PRIMARY> (.48)
<EPS-DILUTED> (.48)
</TABLE>
